When the Office of Management and Budget released the Trump Administration's budget Tuesday, May 23, many were shocked to see a significant change to the credit union tax exemption estimate.
The projected 10-year cost was reported to be $35.31 billion, a leap of more than 30 percent compared to one year prior, according to Credit Union Times. The budget for Fiscal year 2017 reported this estimate to be $26.75 billion.
Estimated exemption causes commotion
This projection caused many to scratch their heads, while inciting strong feelings of either happiness or injustice among others. Small banks have been known to be opposed to the credit union tax, asserting that these institutions act in the same manner as community banks, and should be taxed like so.
However, several experts in the field have spoken up, stating that the estimate is nothing to get worked up over, Credit Union Journal reported.
"Estimates are not gospel, they are merely estimates and can be debated by good men and women for weeks on end," Dennis Dollar, of consulting firm Dollar and Associates and the former chairman of the National Credit Union Administration, said according to Credit Union Journal.
Debating the affordability of exemptions
Though this estimate has historically stayed relatively stable year to year, some are saying this is merely a reflection of the financial industry's continued strength. However, some are pointing to it as a costly expenditure on the federal budget.
"It's up about a third in just a year," explained Christopher Cole, senior regulatory counsel at the Independent Community Bankers of America, according to Credit Union Journal. It shows just how big the exemption is getting...I think it will cause some people to ask if we can continue to afford this."
Credit union professionals disagree, citing studies showing the economic benefit of credit unions' tax exempt status. Carrie Hunt, executive vice president of government affairs and general counsel, wrote a letter listing the many positive outcomes she foresees happening as a result of keeping the exemption around.
"We have an independent study that shows removing the credit union exemption would cost the federal government $38 billion in lost revenue over 10 years, shrink GDP $142 billion and kill off 900,000 jobs," Hunt wrote, according to Credit Union Times. "Each of these outcomes is the direct opposite of what the administration is looking to accomplish: to fuel economic growth and jobs."
Both Dollar and Hunt both predict that lawmakers will choose to leave the exemption as is.
"Personally, I don't think the Trump administration - once they look at the political cost-benefit - will do more than study it a bit and then leave it alone," Dollar explained.
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