So many Americans rely on credit unions to help meet their financial needs. Credit unions are known for their ability to provide exemplary customer service, better rates, and lower fees to consumers. Credit unions are also known for their cooperative structure that puts the needs of their members first, as opposed to banks where the priority is the profits for executives. For these reasons and more, NAFCU remains steadfast in advocating for the credit union industry to maintain its tax exempt status.
This status allows the credit union industry to focus on providing consumers with the outstanding financial products and services it is known for. Even though credit unions are not-for-profit cooperative structures whose tax exempt status has been reaffirmed by the IRS, Treasury Department, and Congress time and time again, bank lobbyists continue to call for the elimination of credit unions’ federal exemption.
A recent study commissioned by NAFCU and conducted by Dr. Robert M. Feinberg of American University and Dr. Douglas Meade of the Interindustry Economic Research Fund takes a closer look at how removing credit unions’ tax exempt status could negatively impact the economy.
The study found that removing credit unions’ tax exempt status would reduce economic activity by a colossal $120 billion over ten years and cost the federal government nearly $56 billion in tax revenue. Perhaps more worrisome, and pertinent to the nascent economic recovery, removing the exempt status would eliminate nearly 80,000 jobs per year over a decade.
If these findings alone don’t convince Congress to ignore any calls from banking groups to eliminate credit unions’ tax exemption, the study revealed that the exemption actually benefits all households, whether credit union members or not, to the tune of $15 billion annually.
In the report, the authors noted the ways bank customers benefit from the role credit unions play in the marketplace. “The benefit of those better rate offerings extends beyond credit union members to bank customers as well, due to increased competition,” Feinberg and Meade wrote. “The study found a 50 percent reduction in the credit union market share would cost bank customers an estimated $6.8 billion to $9.9 billion per year in higher loan rates and lower deposit rates.” The total losses to bank customers under such a scenario totaled $80.7 billion over the ten-year period examined.
These benefits, if lost, could disproportionately affect minority and rural communities. As banks continue to close branches in rural areas, credit unions do their part to close the gap in these banking deserts by growing their rural branch networks in recent years.
NAFCU’s dedicated advocacy team continues to fight for credit unions to ensure Congress is aware of the various benefits resulting from credit unions’ tax exempt status.