The decades-old conflict between the banks and credit unions is expected to come to a head again this week when legislation supported by the banking lobby is introduced to apply the state's franchise tax to large credit unions.
Rep. Jeff Alexander (R) confirmed last week that he plans to introduce a credit union tax bill this week, the details of which had yet to be finalized as The Credit Union Journal was going to press. "I can't say anything until the bill is completed," he said.
But sources indicate the bill would apply the franchise tax, currently paid by banks and other for-profit corporations, to all state-chartered credit unions over $100 million. That could cost as many as 15 credit unions around $1 million a year.
The Utah League of Credit Unions didn't even wait for the bill to be introduced before attacking its supporters. In a radio and TV ad campaign launched last week, the Utah league urged credit union members to call House Speaker Marty Stephens, a long-time credit union antagonist and vice president at Zions Bank, the state's largest bank, and urge him to disavow his support for a new levy on Utah residents. The ads, unusual in that they name an individual lawmaker, are particularly pointed because Stephens is expected to run for the gubernatorial nomination in 2004 in the tax-adverse Republican Party.
Stephen Nelson, a spokesperson for the Utah league, said the ads target Stephens because they believe he is behind the effort and has the influence to kill the proposal, if he wants to.
"As Speaker of the House he has a little bit of power to support the bill or see that it doesn't go anywhere," said Nelson.
The Utah league plans to run the ads, two radio spots and one TV commercial, through the entire 45-day legislative session that is just beginning, said Nelson The new initiative follows a fall ad campaign in which credit unions tried to refute banker claims about unfair competition. "We've been trying to stay on the air a lot," said Nelson.
One of the ads, entitled "Sob Story," shows a distraught banker complaining about credit unions' "unfair advantage" and why she doesn't like credit unions.
But while the bankers have been trying to use the state's growing fiscal crisis, a budget deficit approaching $150 million, to help build a case for a credit union tax, Alexander said that is not the motive behind his bill. "That has nothing to do with it," he said.
Instead, the bill is seen as an effort by the bankers to achieve a long-term goal of applying a tax to credit unions.
Bankers around the country are expected to use the growing fiscal crisis in several states, like Utah, as a reason to target credit unions for new taxes or increased fees.
The latest punch-up represents decades of enmity between the credit unions and banks in Utah, where credit unions claim a major share of the household deposits. It follows several legislative and court battles between the two sides over issues such as field of membership and shared branching.
