The gigantic, sprawling network of banks that makes up the Farm Credit System is many things – including a cash cow for those on the inside.
Unfortunately, one entity that’s not “making bank” off of FCS is the U.S. government – and, by extension, the very American taxpayers that make the System’s financial success a possibility.
The Farm Credit System has revenues of about $26.6 billion, and in 2012 turned a profit of $4.34 billion.
Since the System is a government-sponsored enterprise, that would seem to be a boon for our perpetually cash-strapped federal government. The only problem is, thanks to FCS’s extraordinarily favorable (and unusual) tax advantages, they’re not paying their fair share.
In 2012 – the same year they cleared $4.34 billion in profits – the Farm Credit System paid just $222 million in combined federal, state, and local taxes.
That sounds like a lot, and a fair contribution, until you start doing the math.
And when you start doing the math, that’s when you start getting mad.
That $222 million that the System paid in 2012 adds up to a 5.12% effective tax rate. Chances are, if you pulled out your latest set of tax returns, you’ll find that what you paid in taxes was higher than that.
In fact, 80% of U.S. taxpayers pay a higher rate than the Farm Credit System – which, remember, qualifies as America’s ninth-largest bank.
Playing around with the numbers a little bit shows just how much of a difference that missed tax money could make. If FCS paid another percent in taxes, that would increase their contribution by over $40 million.
And if they paid as much as in taxes as their competitors do, it would be hundreds of millions of dollars.
With our economy in the kind of shape that it is, that kind of money could start to make a big difference.