I have spent 20 years in the banking industry and learned a lot about banking, as well as the legislative issues that relate to the industry and the taxation of income. Am I an expert? No, I am not! However, I want to ask, "Why are we not taxing the Farm Credit Services (FCS) and the Credit Unions (CU)?�
FCS is a government-sponsored enterprise (GSE) and is exempt from paying a taxation rate of what community banks pay, which is approximately 39 percent. Of the 39 percent there is a 6 percent Bank Franchise Tax. This 6 percent tax stays here in South Dakota and is deposited into the state General Fund.
In the boom year, this tax generated as much as $75 million, for the state, on an annual basis. In 2010, the tax raised only $31 million, as a community banker, I am proud to say we have contributed, and paid, our fair share of both state and federal taxes for things such as infrastructure and schools. Not to mention the charitable giving, and the community involvement, community bankers all do n a regular basis.
In 2010, FCS had an effective tax rate of 2.63 percent. Combined with CUs, they had $91.2 million in net profits in South Dakota, and have gone virtually untaxed. If these financial institutions were forced to pay just the 6 percent bank franchise fee, they would have added $5.5 million dollars to the general fund in 2010. Over the last five years, this has cost our state taxpayers $18,471,375. Can we seriously afford to allow this to continue?
These two entities combined are a $4.9 billion dollar industry in South Dakota alone and are getting bigger by the day. In the last five years, these untaxed entities have grown 42.5 percent. As they get bigger, the flow of tax dollars into both the state and federal level gets smaller, and you as a taxpayer will be asked more frequently to pay up. Both have ramped up their lobbying efforts to grow much bigger. Just a few months ago the Yankton school opt-out failed, as taxpayers in the Yankton School District said we want to pay more and help the students but we just cannot afford it. These tax dollars may have changed the outcome.
While there are many good community minded people who work at these institutions the taxation issue, or lack of thereof, is a tough pill to swallow in the middle of a debt crisis.
Please do not misunderstand me. I am not a banker complaining about paying too much in taxes. I am a taxpayer asking very serious questions. Fellow taxpayers, this is low hanging fruit and would provide much needed relief to the taxpayers of our great state. I urge you to contact our state legislators, as well as out Congressional delegation in Washington. We all need to work to make this change happen.
Lynn Peterson, Yankton