DANVILLE, Pa. – Will Pennsylvania be the next state bankers will introduce legislation to tax state-chartered credit union? That still remains to be seen, but at least one banker in the state has called on Gov. Ed Rendell to tax SCCUs as a way to help alleviate the state's budget shortfall. In an editorial in the Feb. 23 edition of the Sunbury Daily Item, a local newspaper here, Barry Miller, president/CEO of The First Susquehanna Bank & Trust stated that he had written Gov. Rendell and proposed "finding new tax income from a previously untapped sector of the business community: credit unions" as a way to "lessen the state's fiscal pain." Using the same rhetoric that's been quoted by banking associations in states where credit union tax legislation has already been introduced – Utah, Iowa, New Mexico, and California – Miller cited a "tax gap" between credit unions and banks and wrote that "credit unions do not pay taxes yet they enjoy the better schools, roads, fire protection and all the other benefits that tax revenues provide. None of us likes to pay taxes, but contributing to the tax base – as virtually all businesses do – should be part of every business' responsibility, credit unions included." Miller went on to discuss how credit unions "have become mainstream financial institutions that are indistinguishable from taxpaying banks and savings associations." Referring to similar rates that area banks and "a bank like credit union" offer for a home equity line of credit, Miller wrote that, "The pricing differential is disappearing as credit unions stuff their coffers with increasing earnings while not contributing their fair share of taxes and community vitality. Credit unions get a free ride on your `nickel'. " Miller suggested that " closing the credit union tax gap would raise new funds to help preserve critical community services at a time when we're finding it difficult to pay for those services." In addition to taxing Pennsylvania's state-chartered credit unions, Miller also recommended Gov. Rendell "petition Congress for the flexibility he needs to meet our state's budget shortfall, including the taxing of federal credit unions doing business in Pennsylvania." Willam Lavage, president/CEO, Service 1st FCU in Danville, in his editorial that was published in the March 2nd edition of Sunbury Daily Item in response to Miller's editorial, called the banker's rationale and arguments "terribly misleading." After making it clear that credit unions do pay taxes, Lavage stated that,"Though banks whine of unfair advantage for the credit unions through their tax exemption, the truth is the banks seek to use the power of government to restrict their competition. The entire purpose of attempting to tax credit unions is not to ensure fairness or a level playing field but to raise the cost of credit union services and increase bank profits. It is most ironic that the bankers are pushing legislators to tax credit unions while at the same time urging the Bush administration to expand sub chapter S rules that in effect lower taxes for some banks." Jim McCormack, president/CEO of the Pennsylvania Credit Union League said he wasn't sure if Miller's editorial was an isolated event or "part of the overall bankers' conspiracy." But he thought any idea that taxing state-chartered credit unions would alleviate the state's budget crisis was ridiculous. "We're facing a $2 billion budget shortfall in Pennsylvania. Anything credit unions would contribute by being taxed would be a drop in the bucket," said McCormack. Not only that, "it would also have a negative effect on the state's finances since state-chartered credit unions would convert to federal charters if a bill was ever passed to tax state-chartered credit unions." So far, McCormack said PCUL's lobbyists haven't heard anything in the halls of the capitol about a bill to tax SCCUs being introduced, "and we have a strong lobbying team." In a proactive move to make sure the credit union message is accurately conveyed and understood by consumers and legislators, PCUL is reinstituting media tours around the state. The tours will focus on editorial boards of the print media, but will also include broadcast media. The League is also going to add a link to its Web site – www.pacul.org – that will feature talking points on taxation and other credit union value issues. The link will be accessible only to PACUL members and will be updated monthly. "Credit unions in Pennsylvania only account for 6% of the combined bank and credit union market in the state. I don't understand why the banks feel threatened by us," said McCormack. -

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