ARLINGTON, Va.—Removing the tax exemption of credit unions would reduce tax revenue by $56 billion and reduce economic activity by $120 billion over the next decade, while eliminating nearly 80,000 jobs per year that span, according to an independent study commissioned by NAFCU.
The study was released in conjunction with NAFCU’s annual Congressional Caucus, being held both virtually and in person in Washington this week.
“As not-for-profit cooperative financial institutions, credit unions have always put their members first by providing them with the best financial products, rates, and lower fees,” said NAFCU President and CEO Dan Berger. “Today, 125 million consumers are members of a credit union. Consumers continue to recognize the benefits of credit unions and how a credit union can help them achieve financial freedom. The tax exemption status provided to credit unions has yielded dividends to consumers, Main Street businesses, and the U.S. economy through lower fees, better financial products, and better rates.”
The study was conducted by American University's Robert M. Feinberg and Interindustry Economic Research Fund's Douglas Meade.
Benefits to Bank Customers
In their report, NAFCU said the authors found 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," the authors stated. The study found a 50% 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.
According to NAFCU, the study further found that the credit union tax exemption benefits all households – including both members and non-members – to the tune of $15 billion a year. Of note, direct benefits to credit union members from these lower rates range from $4.4 to $10.7 billion annually over the past 10 years.
Alignment With Earlier Studies
"These results match the findings from previous studies of the impact of eliminating the credit union tax exemption in Canada and Australia, where the number of credit unions was severely reduced following taxation," the authors stated. "Reduced competition for consumer financial services led to higher interest rates on consumer loans and lower interest rates on deposits in both countries."