Removing Barriers Blog

Banks Continue to Attack Credit Union Tax Status
Posted August 20, 2018 by CUNA Advocacy

Critics of the credit union tax status seem to have it all figured out. They say credit unions use a tax advantage to create a stranglehold on the market that puts banks at a competitive disadvantage. Of course, this claim is patently false, blatantly misleading, and willfully ignorant. 

Credit unions were established to provide many of the same services as banks, and that is where the similarities between credit unions and banks end. 

Last week, the President of the Florida Bankers Associations published an opinion piece in the Wall Street Journal attacking the tax status of America’s credit unions. 

“The problem with modern American credit unions boils down to a simple question: Why should a family of four pay more income taxes than a $90 billion financial institution? That’s the total amount of assets held by Navy Federal Credit Union. Yet it is exempt from federal and state corporate income taxes, as well as sales taxes (and, in my home state of Florida, intangible taxes). This is corporate welfare.”  - Alex Sanchez, President/CEO – Florida Bankers Association

If the banking lobbyists had their way, and credit unions were taxed, the consequences for consumers would be detrimental; for the government would be inconsequential; and for bankers would be a windfall. 

The Joint Committee on Taxation estimates that the “cost” to the government for the credit union tax status will be $1.7 billion in 2018. 

That’s a big number. How about some bigger numbers?

  • $17.1 billion in other federal, state and local tax revenues credit unions and their activities generated in 2016; 
  • $10.8 billion in savings seen by credit union members through higher savings account yields, lower interest rates on loans and fewer and lower fees;  
  • The $4.2 billion in savings that bank customers saw in 2017 due to credit unions’ mere presence in the marketplace.  

Put simply, taxing credit unions might increase government revenues by $1.7 billion (enough to run the government for about three hours).  Consumers would lose $15 billion in benefits and financial service providers that are regularly rated among the best in terms of customer service.  And, the banks would see market participants that ensure affordability of consumer and small business financial access effectively eliminated.   

Alterations to credit unions tax status would threaten the survival of the nation’s 5,700 credit unions, erode the financial well-being of 110 million credit union members and result in the loss of the broader benefits credit unions provide to society, such as promoting small business investment and financial literacy. 

On behalf of America’s credit unions and their 110 million members, CUNA will continue to advocate for the preservation of the credit union tax status.