Capitol Gridlock

The opposite of progress is Congress.

March 01, 2012
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Capitol Gridlock


  • CUs can influence the outcome of key issues by remaining engaged in the legislative process.
  • Any assault on CUs’ tax exemption is completely
  • Board focus: Advocate for enactment of supplemental capital legislation, which would be a significant
    enhancement to the CU charter.


Political science professors have been known to tell this joke to their first-year students.

Recently, Congress has done an excellent job of living up to the spirit of that joke.

Last year saw very little legislative progress on any issues, as Congress bogged itself down in political posturing. The legislative environment isn’t expected to change much in 2012. In fact, the gridlock could become even worse. Several weighty issues face Congress, however, and many of these will have a direct impact on credit unions and their members.

Even if these issues aren’t resolved this year, Congress will resolve them eventually. Credit unions can influence the outcome by remaining engaged in the legislative process.

Congress continues to struggle with deficit reduction, posing a poten­tial threat to the credit union tax status. And housing finance reform and cyber security improvements sit near the top of the Congressional agenda.

And credit unions have their own agenda: increasing the member business lending cap, allowing for supplemental forms of capital, and pursuing legislation to lighten their regulatory burden.


There’s no hiding the fact that the federal government faces a significant budget crisis. In 2011, Congress appointed a “supercommittee” to recommend legislation to reduce the deficit by $1.2 trillion over 10 years.

As with previous deficit reduction efforts, policy makers started by putting every policy option on the table, including eliminating tax expenditures like the credit union tax status. Ultimately, Congress wasn’t able to agree on deficit reduction legislation. The failure of the supercommittee, however, didn’t eliminate the threat to the tax status posed by deficit reduction efforts.

Conventional wisdom suggests that Congress will attempt comprehensive tax reform after the 2012 election, though some think Congress will tackle it earlier. Whenever Congress turns to this issue, it will be critical for credit unions to defend their tax status by reminding Congress and the public of the value credit unions bring to consumers by virtue of the tax exemption.

Government estimates suggest that the credit union tax exemption cost the government approximately $600 million in revenue in 2010. But we need to remind everyone that credit unions leveraged the tax exemption and provided direct financial benefits to members—better rates, and fewer and lower fees—totaling $6.3 billion.

Consumers who aren’t credit union members also benefit from the credit union tax status to the tune of $3.4 billion, because having credit unions in the marketplace puts pressure on banks to adopt more consumer-friendly pricing.

Simply put: A $600 million tax expenditure provides $10 billion in benefits to consumers. Indeed, the credit union tax status is one of the best investments the government makes on behalf of consumers. But taxing credit unions would put these consumer benefits at risk.

Eliminating credit unions’ tax-exempt status would eliminate credit unions—it’s that simple. And given what our economy has just been through, that would be a tragedy for consumers.

Credit unions are the best choice for consumers to conduct their financial services. Taxing credit unions takes that option away from them, and would drive up the cost of financial services for all. Any assault on credit unions’ tax exemption is completely unacceptable.

Next: Data security legislation

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