Dear Mr. or Ms. Legislator:
So, where's the dough? No, I don't mean all that tax income the state spent long before it was ever received and which was subjected to some nifty accounting tricks that would bring a tear to the eye of an Enron executive. And no, I'm not even asking about all that campaign cash that two-stepped around "laws" related to political action committees (PACs) in ways I'm sure elicits fitful, backslapping laughter when you get together with other "lawmakers."
No, in this case I'm writing to ask about the credit union income that is currently untaxed and of which you haven't gotten a piece. Yet. To borrow from Jerry McGuire (not the one who does the fundraisers for you on St. Patrick's Day over at the Irish-American Club), "Show me the money." In short, just where has all that untaxed credit union money gone? Well, here's the funny part-and I imagine after another long session of long nights that were long on taking care of those who have long taken care of you that you could use a good laugh-is that the answer has been provided by the very same bankers who kept knocking on your door and complaining. Again and again and again. I'll get to that in a minute.
As you are no doubt aware, your fellow legislators weren't alone in looking to credit unions to fill the state budget shortfall that might- and I certainly don't mean to tell you how to do your job-have been headed off a few years back when the coffers were flush by a little something credit unions like to call, "savings." As an aside, I think perhaps the reason it's so hard to get bankruptcy reform passed is that you and your fellow legislators seem to have more than a few things in common with many bankruptcy abusers-live large, party hardy, max that credit limit and count on those prepare-for-a-rainy-day fools to bail you out later. But I'll save that for another letter. Anyway, as I was saying you might have noticed that taxing credit unions has become a hot topic in a lot of states. Sure, this is the kind of thing you'd expect (and credit unions got) in California, but the bankers also got the ear of legislators in Oregon, Utah (where they got more than the ear, they got the whole body), and even in the heartland, Iowa! I can only conclude it's because they really know their corn there, and the bankers' argument was pretty much that-corn. The bill really should have been considered by the agriculture committee, 'cause with the corn there was also a fair amount of bull.
The problem, of course, is that bull is the language of most legislatures, so we can see how you were taken in. And the tax-the- credit-unions efforts weren't just limited to those states. In Florida, the bankers bought a "study" from an historically non-partisan group that now suddenly sees credit unions as the answer to the reduced numbers of cash-spending snowbirds from up north and tourists from European countries that, well, I'll just say are such good cooks because they don't have the courage to leave home (Ha!, but that's yet another letter).
As I'm starting to ramble like Strom Thurmond after missing his nap, I'll get to the point. Credit unions in Florida have been quick to urge you to dismiss that "study" on credit union taxation, and apparently most legislators in the state are doing just that. But there's a statement in the "study" that I'll bet you've heard as well from bankers that deserves to be highlighted and hung on your wall with those pictures of you smiling through more chicken-dinner-induced indigestion. It reads, "The CU tax exemption gives credit unions a competitive advantage by reducing their operating costs and allowing them to offer higher rates of return and lower interest rates!" I added the exclamation point because it deserves emphasis.
You're obviously the smart sort, otherwise you wouldn't be an esteemed state legislator, so I'm confident I don't need to point out to you the chutzpah and irony of that statement and countless others made by bankers and their trade associations. Credit unions aren't using the money saved by the tax exemption for Gulfstream jets or ranches for their CEOs or sinfully extravagant shower curtains at their Manhattan hideaways. Heck, most haven't even been to Manhattan (and if you've visited, you may be aware the bar to entry isn't set particularly high.) Instead-and as the bankers point right out-credit unions use the money to cut consumers a break on an auto or home improvement loan, or to give people a little bit more for their money. They're using it to lower fees on credit cards and bounced checks and home mortgages. (And as my time is running short and I'm sure you have a very important "meeting" to attend, I won't even point out that people pay taxes on those cars and automobiles).
So, the next time you meet with the bankers, ask them, "Where does all the money go?" When they hand you a study, point out that they've answered their own question-and then ask, what the heck is wrong with that, and why don't you do the same thing?
Frank J. Diekmann
Frank J. Diekmann is editor of The Credit Union Journal. He can be reached at fdiekmann cujournal.com.