WASHINGTON — After a parade of lawmakers all told credit unions at CUNA's GAC this week that they support the community's tax-exempt status, it might be tempting to dismiss this issue, particularly with so many other legislative and regulatory items on the CU agenda — but that would be a big mistake, according to several experts.
"It's important for you to always be up on the Hill and explaining why it's so important to retain your tax-exempt status," said Mark Gerson, a tax lobbyist for Miller Chavalier. "It's going to be key for credit unions to stay in front of their policymakers on this issue."
There are three primary reasons CUs must remain vigilant on this issue, despite the fact that so many lawmakers have gone on the record supporting the tax exemption:
- This is not your father's Congress. "There has been 60% turnover in Congress since 2009," he explained. "That means there are lot of new people on the Hill who don't already know you." With so many new faces, that means a whole lot of people who need to be educated about why CUs deserve to keep their tax status.
- It's ain't over 'til it's over. "Tax reform isn't over until a president — whether it's Obama or whomever lands in the White House in 2016 — signs a bill," said CUNA Chief Advocacy Officer Ryan Donovan. "We know there is strong support for the credit union tax exemption in Congress, but we can't afford to take it for granted. If you're not at the table, you're on the menu."
- Everything's on the table. "We're taking a blank slate approach," said Chris Campbell, Senate Finance Committee Chairman Orrin Hatch's senior legislative staffer working behind the scenes at the Senate Finance Committee. "We're looking at, if all of the tax preferences were gone, which ones should we put back in. That means you have to be able to defend and justify your preference in the tax code."
There's a reason the tax code hasn't been revamped since 1986: it's not easy. Thirty years ago, the approach was to incentivize a consumer economy, and it worked. Now, Campbell said, it's time to move to more of a savings economy and finding ways to incentivize savings.
And the timing is key. Due to the upcoming presidential election, if a tax reform bill isn't passed in 2015, it will be a dead issue until 2017, by which time it could be a whole new set of players, and credit unions will have to start the whole process of educating lawmakers all over again.
"The longer we kick this can down the road, the harder this becomes," Campbell said, explaining that the growing burden of entitlements means "the less revenue we have to buy the tax rates down."
While that may sound like a brief reprieve, there's good reason for CUs to want this to be over and done with before the next presidential election.
"If we miss it this year, then it's going to factor big in the presidential election," he said, and that means it becomes an even more highly visible, high-stakes game at that point.
And it may well already be coming to that, he suggested. "There may be a small window of opportunity right no on the corporate side," Gerson said, noting that Democrats and Republicans are just a couple of percentage points away in what they want to see happen for the corporate tax rate Democrats are calling for lowering it from the current 35% to 28%, while Republicans are calling for 25%. "But on the individual side, the gap between the two parties is huge."