If you act like a bank, you should be taxed like one

The debate over how to reform the nation’s tax code – which means, among other things, eliminating wasteful tax breaks – is having the predictable effect of smoking out those industries who benefit from these tax subsidies.

Today, it’s the credit unions saying “not me.”

In a September 26, 2013 Daily Caller piece, the credit union industry again came to the defense of its tax exemption. The piece did not offer a coherent policy rationale for its privileged tax status other than to state the self-serving proposition that requiring these previously tax-exempt businesses to pay any income tax at all would be a “new tax”.

Hardly. Extending the current corporate income tax to an industry that has enjoyed tax-free status for 76 years is not a new tax. It’s a correction of flawed tax policy set in motion in 1937.

This was the major finding of a 2005 Tax Foundation study that estimated the tax loss to the federal Treasury over ten years to be $31.3 billion. Moreover, while credit unions were given their tax exempt status to help them serve the poor, our study found that “there is no solid evidence that credit unions have turned the subsidy into service for low-income people.”

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