Budget Deficit Reshines Light On Tax Exemption
The fiscal train wreck that is the federal government's budget has come to paralyze Congress, just as it did in the 1980s.
While lawmakers have been discussing the relative merits of balanced budgets versus deficit spending to spur the economy, the numbers coming out of the White House over the past few weeks have stunned everyone and come to dominate the political discussion. Like they were during the 1980s, people are pointing fingers as to who is responsible for squandering a record budget surplus of some $230 billion just three years ago to create another record-a deficit of $475 billion for last year. And the numbers get worse-a projected $535-billion deficit for this year, not even counting another $100 billion or so expected to be spent on the wars in Iraq and Afghanistan.
Every week something else surfaces to make the average taxpayer wonder at the competency of their representatives. Last week it was revealed that the Congress undershot projections for the new prescription drug plan for senior citizens by $134 billion! That's $134 billion with a 'B'!
This fiscal folly is certain to have broad ramifications for many years to come, hamstringing any efforts to expand spending in the many areas for which there is broad bipartisan support. That includes highway construction, aid to cities, education, the war on terrorism, and many others.
From a credit union perspective, the concern is much more tangible. Already, talk is being circulated on Capitol Hill about the costs of the credit union tax exemption. The Bush Administration, which is now desperately searching for new revenue sources, proposed a budget last week for the next fiscal year that projects the exemption to amount to $1.3 billion in 2003, $1.36 billion in 2004 and $1.43 billion in 2005. The budget estimates that the credit unions' tax exemption will total almost $8 billion between 2005 and 2009.
The banking lobby, of course, was quick to pick up on this. America's Community Bankers, which is made of savings and loans, issued a press release touting the estimates. "We are delighted that this important information is now before the American taxpayers so that they can see for themselves the free ride the credit unions are getting," said William Zuppe, chairman of the lobbying group. "The entire credit union industry combined, which made $5.6 billion in 2002, will not pay a dime in federal income taxes."
Even with a tax-averse Republican Congress, these figures are going to be hard to ignore as Congress struggles with fiscal imbalance.