A years-long battle between Iowa’s community banks and its credit unions flared up at the capitol today, where a legislative committee is conducting a routine review of tax credits.
The financial institutions are taxed differently, and banks argue it’s an unlevel playing field.
Kevin VanderLee with the Iowa Bankers Association describes a new community bank that was started in Johnston.
“There were individuals who made their investment to start a bank,” VanderLee says.
But he says in under six years, a new credit union formerly called the State Employees Credit Union moved their operations center to Johnston. He says credit unions are following the money.
“Johnston is the highest wealth per capita community in the state of Iowa,” VanderLee says. “All you have to do is follow the branches, where they are being opened, and it will give you a good sense of how competition is working in our state.”
But a lobbyist for the Iowa Credit Union League disagrees.
“That’s silly,” says Justin Hupfer. “Credit unions are not chasing down money.”
Hupfer says credit unions serve low-to-middle class Iowans, not the wealthy.
The federal government approved credit unions during the Great Depression as an alternative to for-profit banks. Hupfer says the tax structure enables credit unions to keep loan rates low, and to return profits to members.
Banks are taxed on their income, while credit unions pay a tax on their reserves.
House Ways and Means Committee Chair, Republican Tom Sands of Wapello, says in the past banks have sponsored legislation to change the tax structure or require credit unions to give more capitol back to their membership, which credit unions have opposed.
Sands says banks and credit unions have supporters in both the Republican and Democratic party, so the bills have not advanced. He says it’s not likely banks will get legislation passed next year.
“It would be an uphill battle,” Sands says.