Let’s Keep the Federal Tax Exemption
Under increased pressure from the big banks, many elected officials on both sides of the aisle have been hinting that it may be time to do away with the federal tax exemption enjoyed by credit unions nationwide.
This is incredibly frustrating for credit union members. Originally granted by Congress in the wake of the Great Depression, the federal tax exemption recognizes that credit unions, unlike banks, are nonprofits that return any earnings they make to their members by providing higher interest rates on savings, low (or no) fees and lower loan rates than banks are able to offer.
Faced with growing competition from credit unions, though, banks are putting more pressure on elected officials to remove the tax exemption — a move that ultimately would result in a tax increase on the middle-class citizens who represent the majority of credit union members.
Three years ago, credit union members fought off an attempt by the banks to remove the tax exemption. Congress responded by allowing credit unions to retain their tax exemption, enabling them to fulfill their mission “to promote thrift and make loans to members for provident purposes.” Yet here we are once again, making the same argument that credit unions should continue to operate as they always have, putting the interests of our members — and not profit margins or shareholder demands — first. Meeting the financial needs of their members, after all, is the very reason why credit unions exist.
The bottom line is obvious: Big banks and many elected officials want to raise taxes on the middle class citizens who represent the majority of credit union members. Doing so will help to eliminate the competition that credit unions provide to the big banks and increase returns to their shareholders.
Perhaps it is time to again remind our elected officials about the important role credit unions play in providing affordable financial services to everyone. And they do so while keeping them, and not shareholders, top of mind.
— Rod Staatz, president and CEO, SECU