SALT LAKE CITY, Utah—More than a dozen public policy organizations, including the Competitive Enterprise Institute and Americans for Tax Reform, have written Senate Finance Committee Chairman Orrin Hatch (R-UT) defending the tax status of credit unions.
“The undersigned groups write to you today to underscore the importance of keeping that tax relief in place for everyone and, in particular, firms that fulfill the saving and borrowing needs of consumers,” the letter states. “We ask you and other committee members to be wary of any proposal that penalizes the millions of Americans who have chosen to join credit unions to advance their financial needs.
As President Ronald Reagan stated in 1984, ‘Credit unions are uniquely democratic economic organizations, founded on the principle that persons of good character and modest means, joining together in cooperative spirit and action, can promote thrift, create a source of credit for productive purposes, and build a better standard of living for themselves.’”
The organizations also asked that committee note that credit unions are especially important to U.S. troops.
“The two largest credit unions do have substantial assets, but they are essentially limited to serving the families of active-duty military and veterans and some civilian defense employees,” the groups wrote.
CUs to Pay Higher Taxes Than Banks?
“While we encourage your committee to examine taxation of financial firms in light of changes to the economy, we ask that any such examination entail a comprehensive review of tax provisions affecting banks and credit unions. While credit unions are not taxed at the corporate level, their individual member-owners are fully taxed on the proceeds distributed by the credit unions, as they are taxed on interest. Interestingly, since the Tax Cuts and Jobs Act lowered the top corporate rate to 21%, many banks could actually pay less of a share of their incomes than credit unions, whose members could pay a top individual rate of 37%. In addition, many banks choose to do business as S-corporations, which operate under a single-taxation structure similar to credit unions.”