Pub. 4 2016 Issue 1

www.uba.org 4 The Bottom Line By Howard Headlee, President, Utah Bankers Association The numbers are out, and 2015 marked the third year in a row that America First retained over $100 million in profits from its members. The top four tax-exempt financial institutions headquartered in Utah - America First, Mountain America, GoldenWest and Utah Community - together retained over $200 million in profits last year. And how much income tax did they contribute to Utah’s School Fund? Zip, Zero, Zilch! How Long Can Credit Unions Stand By and Watch W e all just watched our state legislature scratch and claw and fight to find enough money to fund a 3% increase in the Weighted Pupil Unit (WPU) for our children’s schools. Each 1% increase requires $26 million in tax revenues. And somehow these four corporations retained over $200 million in profits last year and contributed nothing? They know we can’t pay teachers enough, they know we spend less per student than any other state, they know other taxpayers are making serious sacrifices to do all they can to support our schools, and yet they stand by and watch. Is everyone OK with these incredibly profitable businesses taking a pass when it comes to supporting our schools? (Every penny of corporate income tax goes directly into Utah’s School Fund.) I decided to take a look at their earnings after sitting through a Utah Jazz game with my son. I was bombarded during nearly every time out with a promotion from one of these tax-exempt financial service providers. “Things must be going very well for them,” I thought to myself. I had no idea how well. If the fans understood the costs of these gimmicky promotions were coming right out of their children’s classroom they would chide, not cheer. Utahns are surprised when they find out that every time some- one takes their accounts or loans from a bank to one of these subsidized businesses, our schools lose money. That’s messed up. People should be free to choose whatever financial institu- tion they want without having to worry about the impact of their decision on school kids. Listen, banks are doing fine. In fact, banks are competing amazingly well against these subsidized competitors. And despite charging comparable rates and fees, last year Utah’s banks paid over $5 billion in taxes, made more than $50 million in voluntary charitable contributions, and invested more than $5 billion in our low to moderate income communities. Utah’s banks are proud to play a central role in our state’s success. But whether or not a $7 billion financial institution should be able to retain $100 million in profit without paying income taxes to support our local schools is a debate that has nothing to do with banks. These highly profitable corporations have historically dodged their responsibilities by turning the focus of this debate on every- one but themselves. But that strategy is getting tired, and with over $200 million in retained profits last year, it is getting much more difficult as well. The Utah Legislature has done their part. After studying this issue for two years, legislators adopted an innovative solution to this problem and asked Congress to cooperate by addressing the outdated federal tax loophole. But Congress can’t seem to get anything done right now, so these massive corporations continue to dodge income taxes on their profits, and sales taxes on their purchases - they don’t even pay hotel or car rental taxes when they travel on business. They maintain their status as instrumen- talities of the federal government, protected from federal, state and local taxes (except property taxes). So while Congress sleeps, these tax-subsidized businesses grow, and advertise like crazy! And as they grow, our tax base erodes. Perhaps we should at least require some truth-in-advertising so Utahns are aware that every time they choose to do business with one of these highly profitable federal instrumentalities, funding for our schools drops. A little sunshine never hurts. n