Credit unions lobbyists have dubbed new legislation to ease income taxes for many banks the "Emperor's New Clothes" bill, "as it exposes the raw hypocrisy of the bankers' calls to tax credit unions," according to CUNA.
The bill in question, H.R. 2896, was approved by a 24-15 vote by the House Ways & Means Committee-the same panel that would be called on to consider any attempt to impose taxes on credit unions.
"CUNA has no objection to financial institutions legitimately reducing their tax burden and believes any savings should be passed along to customers," said John McKechnie CUNA's SVP-governmental affairs. "Yet, the bankers are constantly calling for taxation of non-profit credit unions, while simultaneously maneuvering for more tax breaks for more banks."
The legislation would make it easier for more banks to qualify and retain Subchapter S status, which exempts them from paying income tax.
"The hollowness of their demand to impose taxes on credit unions is further bared every time they succeed in cutting the taxes that they themselves pay," McKechnie added, noting that banks have attempted to remove a number of restrictions on Sub S banks over the last several years.
According to an analysis by CUNA, if recent growth rates of Sub S banks continue, by 2006 the total amount of tax revenue foregone by the U.S. Treasury due to banks electing such tax status will exceed the annual tax the federal government would collect from credit unions if they were subject to tax.
"The 'Emperor's New Clothes' bill will just accelerate that result," McKechnie suggested. "Further, over the next 10 years, the tax foregone due to more banks electing Sub S status under current law will be about $13.5 billion-a figure that will only rise with the bill now on its way to the House floor."
