Senate Finance Committee leadership sent credit union trades reeling Thursday when Chairman Max Baucus (D-Mont.) and Ranking Member Orrin Hatch (R-Utah) sent a Dear Colleague letter to all senators, asking them to advocate for which tax exemptions should be kept by July 26.
“In order to make sure that we end up with a simpler, more efficient and fairer tax code, we believe it is important to start with a ‘blank slate’—that is, a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences that some refer to as ‘tax expenditures,’” they said in the letter.
Both senators said they believe some existing tax expenditures should be kept but also said the tax code is “also littered with preferences for special interests.”
The two said they plan to operate from an assumption that all special provisions will be eliminated except those that can provide clear evidence that they help grow the economy, make the tax code fairer or effectively promote other important policy objectives.
“Today, we write to ask you to formally submit legislative language or detailed proposals for what tax expenditures meet these tests and should be included in a reformed tax code, as well as other provisions that should be added, repealed or reformed as part of tax reform,” the letter said.
CUNA President Bill Cheney told Credit Union Times the letter means, in the eyes of those writing the next tax law, the credit union tax status is gone, and the industry must get it back.
“CUNA and the Leagues launched the Don’t Tax My Credit Union campaign more than a month ago because we saw signs of the “blank sheet” approach coming,” Cheney said. “Ultimately, success will depend on credit unions getting their members engaged with this campaign and ensuring that the voices of 96 million members are heard.”
Dan Berger, who will take over NAFCU as president/CEO next month, fired off a response letter to Baucus and Hatch, urging them to protect the exemption.
“The efforts of credit unions and the large positive impact they have on the financial welfare of American consumers would not be possible without the credit union tax exemption,” Berger wrote.
“Without credit unions, for-profit banks would remain unchecked and likely increase rates and fees on consumers,” his letter said. “Additionally, many consumers would not have access to traditional financial services institutions and have no choice but to turn to high-cost predatory alternatives.”
More than 90 tax expenditures on the Joint Tax Committee’s list are larger than the credit union exemption, he added, and asked the two senators to consider alternatives that would have a less devastating impact on credit unions and the economy as a whole.