WASHINGTON—Outgoing Sen. Tom Coburn today listed the credit union tax exemption among “federal tax giveways” that he recommends be eliminated as part of his “Tax Decoder” report.
In the process Coburn has lumped credit unions in with professional athletes and the National Football League as the recipients of tax breaks he wants to see eliminated.
The report will be the last on government waste by Coburn (R-OK), who is resigning two years early from Congress and who has targeted numerous tax breaks, including those for his home state oil and gas, as part of an broader belief that the “U.S. government should stop trying to provide business incentives through the tax code and instead let the free market decide what is viable.”
The report’s call for elimination of the tax exemption for credit unions was immediately criticized by CUNA.
“Sen. Coburn has had a distinguished career in the Senate, but I have to take issue with his view of the credit union tax status: He’s just wrong and uninformed,” said CUNA CEO Jim Nussle. “Our tax status is based on the structure of credit unions – as not-for-profit, member-owned, volunteer-led financial institutions. It is not based on the products or services a credit union offers. Sen. Coburn’s report also reveals little understanding of how credit unions differ from banks. At a bank, the beneficiaries of the bank’s services are the shareholders – who expect as much profit as possible be returned to them from bank customers….Because of the cooperative ownership structure, any excess earnings of a credit union are redirected back to members in the form of lower loan interest rates and higher savings yields.”
In his statement, Nussle cited CUNA research showing credit union members in the year ended June 2014 realized financial benefits of nearly $6 billion, just by saving at, borrowing from or acquiring other financial services from their credit unions, rather than from a bank.
“Further, the competitive pressure credit unions place on the financial services marketplace, for lower loan rates and higher savings return, benefits all consumers,” said Nussle.
There is little real threat to the credit union tax exemption in Congress. In fact, at the same time Coburn has issued his report, Congress is set to pass new and renewed tax breaks across a swath of industries and organizations.
Coburn, who has been sometimes called “Dr. No” in the Senate, reiterated his belief that “Powerful special interests and Washington politicians have turned the tax code into a complicated mess that rewards only a few at the expense of middle class taxpayers. The tax code is Congress' favorite tool for meddling in the free market and impeding freedom, offering rewards and punishments to coerce Americans and manipulate the economy."
"It's useful to remember that, as a House member, he was one of only eight votes against HR 1151 in 1998, so it would hard to call Senator Coburn a credit union friend," noted John McKechnie, partner with the Washington firm Total Spectrum. "That said, it's a disappointing swan song for a member of the Senate to simply recycle a bunch of tired rhetoric from the bank lobby and pass it off as a serious critique of tax policy."
Coburn’s report states that tax breaks cost the U.S. Treasury more than $900 billion this year, and has suggested another $500 billion in taxes go uncollected each year, more than enough to cover the projected deficit.
Among the tax breaks targeted by Coburn: the Research and Development tax credit, the tax-free foundations of professional athletes, and flexible savings accounts (FSAs).