Words to the wise banker, compliments of Credit Union National Association president Daniel A. Mica: pressing for the elimination of credit unions’ tax exemption will backfire.
“They are trying to create a major showdown in Washington,” Mr. Mica said in an interview earlier this month. “Taxation is the nuclear option. Do it, and you end credit unions as we know them today.
“It is not going to happen.”
The way the former congressman from Florida sees it, Congress is never going to levy a tax on credit unions, and bankers are just wasting their time pushing for it.
Diane Casey-Landry, the president and CEO of America’s Community Bankers, said Mr. Mica “is using inflammatory rhetoric” about credit union taxation in the hopes of diverting attention from the National Credit Union Administration’s decision to block two Texas credit unions from converting to banks, even though members of both institutions voted overwhelmingly to approve the charter conversions.
“The issue of the day is not taxation, it is choice, and giving credit unions the freedom to choose what they want to be,” Ms. Casey-Landry said in an interview Thursday. “People do not want to see their options limited or removed altogether.”
Mr. Mica, however, said the issues were linked, and that the same “zealots” who are agitating for taxation of credit unions are leading the attack on the NCUA and its conversion policies.
“You’ve got these zealots who have always wanted to put credit unions out of business,” he said. “If they can change the tax status, or convince credit unions to convert to banks, they will do that.”
According to Mr. Mica, there is a silent majority of bankers who have no problem with credit unions, and he called on them to rein in those going after credit unions.
“I’m asking the saner, truly thoughtful bankers to tell the others to knock off this fight,” he said.
Keith Leggett, an economist for the American Bankers Association, called Mr. Mica’s plea “wishful thinking.”
He said talk of a “nuclear option” was a sign that CUNA and others in the credit union industry are “running scared.
“They know the focus is on them. After years of relative anonymity, people are starting to look at what is going on in their industry.”
In fact, over the past 14 months three think tanks have issued reports suggesting the elimination of the exemption. Add to that the comments of House Ways and Means Committee Chairman Bill Thomas, R-Calif., who said last year that the credit union exemption should be studied to see whether its benefits outweigh its costs.
Mr. Leggett also accused CUNA and other credit union advocates of hypocrisy for their defense of the tax exemption.
“They want to repeal the Depression-era legislation that restricts their membership, business lending, and capital formation, but they want to keep their Depression-era tax exemption,” he said. “They can’t have it both ways.”
Fred R. Becker, the president and CEO of the National Association of Federal Credit Unions, said banks’ insistence on railing against credit unions over taxation, conversion, and other issues threatens to boomerang and prevent both industries from getting any meaningful regulatory-relief legislation enacted.
“The more you press these other issues, the further the focus gets from regulatory relief,” Mr. Becker said Thursday.
Both industries have regulatory-relief bills pending in Congress, but if the fighting continues, “it could result in Congress throwing up its hands and not dealing” with either, he said.
