The Pennsylvania Credit Union Association moved quickly Monday to oppose a suggestion by the state's Auditor General to consider eliminating the tax exemption for credit unions and other nonprofits as a revenue source to fund the state's budget shortfall.
In a letter sent to Jack Wagner, the state official, James McCormack, PCUA president/CEO, warned that lifting the tax exemption would seriously injure the CU business model.
Wagner, in a press statement last week, estimated that $100 million might be gained for the state by "suspending, reducing or eliminating" tax breaks for Pennsylvania nonprofits "for the duration of the crisis."
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Wagner argued that the state's tax code "is filled with tax breaks for special interests and they should be thoroughly reviewed."
McCormack replied that "there are hundreds of stories to illustrate how the tax exempt status of credit unions benefits residents and communities of the Commonwealth." By eliminating the tax exemption, "earnings and profits would necessarily become a focal point" for credit unions rather than "the current focus of providing quality services and attention" to low-cost products.
Moreover, McCormack said, "Creating a tax on credit unions would disrupt the balance of market competition."
As part of a package of cost cutting steps designed to solve the state's budget impasse, Wagner suggested the state start reviewing and closing tax loopholes provided to select individuals and
organizations in addition to making major reductions in Medicaid payments and eliminating state welfare waste.
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