WASHINGTON–The positive economic impact of the credit union tax exemption and the fundamental differences between how banks and CUs operate cannot be overlooked, according to an op-ed by NAFCU’s Carrie Hunt that was published in The Hill, a publication that focuses on Capitol Hill.
“The 116th Congress has begun, but the seats are barely warmed and bank trade associations are already making their demands. On that list are credit unions, which is not at all surprising,” wrote Hunt, NAFCU’s EVP and general counsel. “This time, they are making a new argument using bipartisanship as the platform to call out the federal corporate income tax exemption for credit unions. While we appreciate their fervor to defend their industry, the picture painted is quite flawed.”
‘The Answer is Clear’
Why is that picture flawed? According to Hunt banks continue to cite “tough conditions” even while sitting on their highest-ever levels of capital and while dominating the financial market.
“The fact is that credit unions are nonprofit financial institutions that exist to serve their community members while also strengthening the economy. It seems our bigger counterparts think that only the growth of one kind of financial institution is allowed,” wrote Hunt. “If a credit union grows, does it mean banks cannot? Should we not be focusing on the needs of the consumer anyway? The answer is very clear.”
Hunt cited an independent study commissioned by NAFCU that showed credit unions drive some $16 billion in economic growth each year in the United States. “If the tax exemption is eliminated, the country would lose $38 billion in tax revenue, $142 billion in gross domestic product, and some 900,000 jobs over the next decade,” Hunt said.
Challenging ‘Insinuations’
Hunt also stated that while banking industry lobbyists “continue to insinuate that the tax exemption gives credit unions an unfair advantage over banks,” significant differences between the two types of charters remain, one of the most important being that credit unions direct any income back into their institutions for the benefit of their community members.
“Keep in mind that about a third of banks enjoy ‘Subchapter S’ status so that they can distribute untaxed profits directly to shareholders. Banks also benefited from the corporate tax cut,” Hunt said, adding that 2018’s corporate tax cuts led to $30 billion in payouts to shareholders. Hunt added that the banking industry has also been hit with $240 billion in fines since the 2008 financial crisis.
“While bank lobbyists attempt to discredit the mission of the credit union industry, it is important to keep in mind that anyone promoting the end of the credit union tax exemption is in essence supporting the elimination of billions in economic growth, billions in federal revenue, and hundreds of thousands of jobs,” wrote Hunt.