Don't Kid Yourself, Losing Exemption Would Hurt
I feel compelled to respond to Rick Leas comments in the Sept. 28 issue where he agreed with Rob Nicholls from Australia that taxation wouldn't kill U.S. credit unions. While it might be true that taxation wouldn't kill credit unions, what can be learned from the Australian experience is that the effects are far from positive. Both Rob and Rick argue that credit unions in the U.S. should give up their tax-free status in return for increased credit union powers. If this is such a great idea, consider these facts from Down Under. Immediately prior to the tax being introduced, credit unions in Australia enjoyed a 5.5% share of the Australian loan market. Just eight years later, this has dropped to 4.4%. On the asset front, prior to taxation, credit unions had a 1.2% of the market. Eight years later, that has dropped to 1.16%. The number of credit unions has halved (329 to 164) and the number of credit union branches has plummeted from 2,615 to 928. Sure, tax might just be an additional operational expense for some credit unions, but for many this may be the last straw. For others, money that was used for socially responsible activities like teaching financial literacy in schools might be used to pay the tax. Also, the urge to behave like a bank because you are treated like a bank may become a powerful force as it was in Australia. I was active in the Australian movement for 16 years prior to the tax and six years following its introduction. Since moving to the U.S. last year, I've had the opportunity to speak to credit union leaders in over 20 states on this issue. My advice to the U.S. movement is to continue to vigorously resist the tax and continue to behave like credit unions. Our future might depend on it. Mark Lynch Credit Union Consultant & Presenter Sault Ste Marie, Mich.