Words Matter As Bankers Target Big Credit Unions’ Tax Exemption

Credit unions need to redefine the debate to clarify the difference between for-profit banks and member-owned financial cooperatives.

Credit Union Times reported on Feb. 21 that the nation’s bankers have asked the Senate Banking Committee to tax large credit unions. Loudly, and in unison, credit unions must say NO!

Income taxes on big credit unions would be the proverbial camel’s nose under the tent-flap. It’s salami tactics. Bankers know they can’t take on credit unions nationwide, so they are going state by state, peer group by peer group, slice by slice.

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Millions of post cards and phone calls saying Don’t tax my credit union! still matter, but they’re no longer enough. Not by a long shot. The audience has fragmented, and it’s changed. Politics in our country is different from what it was in the past, and bankers are ahead in figuring that out.

Stop talking about income statements and profitability. Credit unions have revenue. Credit unions have margin. Words matter, and if bankers choose the words that describe credit unions, the battle is already half lost.

We need to find new ways to talk about who credit unions are, what they do, why and how they do it, and why and how it makes them different from banks. We need to find ways to talk about IMPACT, about mission yes, we do, and about public policy, the reasons credit unions exist, and the unique roles they fill. Most of all, we need new language to talk about positive net revenue.

Income, in the language of taxation, is something that delivers measurable economic benefit to the underlying owner. Credit unions have no income. Period. Credit union owners do have dividend income, which does get taxed. Do credit unions talk about that? They look and are taxed a lot like S Corporations, except their owners don’t have any stock to sell. Do credit unions talk about that?

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Tax big credit unions? Because they look like banks? Which ones look like banks? How do they look like banks? Big commercial portfolios? Nope! Holding companies with investment banking subsidiaries? Not here. Billion-dollar stock dividends? Seriously? The ability to raise capital? That would be another no!

We need to redefine the terms of this debate to highlight what makes credit unions different. Let’s stop talking about income statements and profitability. Those terms describe for-profit companies. Credit unions have revenue, not income. Credit unions have margin, not profit. Words matter, and if we keep letting bankers choose the words that describe credit unions, the battle is already half lost.

February 26, 2018

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