Diverse groups support CU tax stand

WASHINGTON (11/3/05)—Four national organizations—including Americans for Tax Reform (ATR) and the Consumer Federation of America (CFA)—have written to urge Chairman Bill Thomas (R-Calif.) and the House Ways and Means Committee to support the federal income tax exemption for credit unions.

The letters were delivered on the eve of the Ways and Means Committee's hearing to examine the credit union tax status, which is scheduled to start at 10:30 a.m. ET today. They were sent by a diverse range of groups, including ATR and the CFA, as well as the National Cooperative Business Association (NCBA) and the National Federation of Community Development Credit Unions (NFCDCU).

The ATR letter, signed by President Grover Norquist, underscored that "contrary to the claim of tax-hikers," credit unions do pay taxes in the form of payroll taxes, sales taxes, and property taxes.

"Higher taxes never resulted in a more competitive market or a better deal for consumers," Norquist said, adding that a new tax would force credit unions to increase fees and rates, and lower dividends.

Stephen Brobeck, executive director of CFA, wrote that his group is puzzled that any policymaker could seriously consider taxing credit unions.

"Our current financial services system functions as effectively as it does in no small measure because of the existence of these non-profit financial service providers," according to Brobeck.

He added that credit unions serve the "extremely useful function" of restraining anti-consumer bank practices, as well as meeting their own members' needs.

In a letter from the NCBA, President/CEO Paul Hazen wrote to Chairman Thomas that public law states that credit unions are exempt from certain taxes because they are member-owned, democratically operated, not-for-profit organizations required to operate without profit and without capital stock.

"How successful a credit union is either in terms of size or meeting the needs of its members should not be a measure of whether and how it is taxed," Hazen wrote, noting that regardless of size, structure remains the same.

The group representing community development credit unions, the NFCDCU, wrote that adding a tax to credit unions would harm those credit unions and the millions of Americans who rely on them.

NFCDCU Executive Director Clifford N. Rosenthal said a new tax would "inhibit the growing, innovative efforts of credit unions of all types and sizes to expand services to low-income communities." His letter also noted that "taxation based on asset size would unnaturally divide the credit union movement."

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