As tax policy is actively being debated in Washington, credit unions have once again become a target of the banking lobby’s attempts to pressure Congress to eliminate the credit union difference.
The bankers have long pushed to tax over 142 million Americans by eliminating the credit union tax status, but have pivoted in recent weeks to calling for a tax on only those over $1 billion in assets. Credit unions have responded with a unified front, highlighting the hypocrisy of bankers’ attacks that further expose they are focused on nothing more than limiting competition.
Bank lobbyists claim that the not-for-profit status gives credit unions an unfair advantage over other financial institutions in the marketplace. Of course, this ignores the fact that banks hold 91.2% of all U.S. financial service assets. And community banks consistently tell their own regulators that credit unions are NOT a significant competitive threat. The Conference of State Bank Supervisors Annual Survey of Community Banks consistently shows that other community banks and large banks are their biggest competitors—not credit unions, and not even by a close margin. That doesn’t match up with what their bank lobbyists are telling lawmakers.
The credit union tax status has nothing to do with a credit union’s size, but everything to do with credit unions’ mission of people helping people. Banks, which need to make money off of every customer for shareholder returns, conveniently leave out that more than 1/4 of them are exempt from taxes with Subchapter S status. Unlike credit unions—which return the savings from their tax status to their members and communities through lower cost services and better rates on loans—studies have shown banks overlook consumers and put that money in their Wall Street investors’ pockets.
The pivot to tax only “large” credit unions is especially disappointing as this primarily targets defense credit unions who serve our nation’s servicemembers, veterans, and their families. In fact, military families account for over one-half of all members in the nation’s largest credit unions. Defense credit unions are invested in the financial well-being of their members, and their collective services offered to educate members and help them achieve financial milestones are a huge benefit to the strength of our country.
Credit unions already pay a host of taxes: property, sales, real estate, payroll, and other state, federal, and local taxes. The federal income tax status allows credit unions to generate $27.5 billion in direct benefits and $38.3 billion in total benefits for consumers every year, representing a 1,200% return on the government’s investment in the industry’s tax status.
This is why eliminating the tax status would be so detrimental. Its elimination would not only hurt those who depend on credit unions, but all consumers. An independent study commissioned by America’s Credit Unions found that a 50% reduction in the credit union market share would cost bank customers an estimated $11.9 billion to $22.8 billion per year in higher loan rates and lower deposit rates.
Don’t fall for the misinformation pushed by bank lobbyists who are bent on increasing value for Wall Street. Stand with consumers on Main Street and credit unions by telling Congress: “Don’t tax my credit union!”
