Credit Unions' Tax Status Well-Deserved
Some bankers and their trade associations are asking legislators to tax credit unions, even though it was only banks that needed and took huge government bailouts. And the truth is, a tax hike on credit unions would be a tax hike on all American consumers.
What the folks who want to tax credit unions don't make clear is that credit unions do pay property, sales, and payroll taxes.
Why credit unions are tax-exempt
Superior financial service to members distinguishes credit unions from other financial institutions, particularly banks. A bank's first priority is to maximize shareholders' profits—from the rates and fees it charges customers for loans and other services. A credit union's top priority is to serve members with exceptional customer service, products, and services at fair prices.
Last year, on average, each credit union member got a direct financial benefit of $62. That came from lower rates on loans, higher returns on savings, and lower and fewer fees than he or she would have paid by doing business with a bank.
But that $62 benefit is only an average. Active members who use many credit union services often see even greater benefits. The difference amounts to about $6 billion spread among 96 million credit union members nationwide.
In addition to individual savings, credit union members also have access to a financial institution that they own and that keeps their interests first, providing exceptional service to members at all income levels.
How tax status affects consumers
Further, the tax exemption helps to ensure that all consumers have competitive choices in the marketplace.
In fact, for every $1 of their tax exemption, credit unions return $10 to consumers in better rates and lower fees.
That's a solid investment in our communities. The reality is, if credit unions were taxed, it's unlikely members could still see the financial benefits they do now. Just as banks pass along their tax payments in fees and interest rates, if taxed, credit unions would have to pass those expenses along as well. The effect on how much you pay for credit union loans for cars, education, and houses, or the dividends you earn on credit union savings, would be significant.
By making and keeping financial services more affordable, credit unions help you reach your goals and improve your financial well-being.
The value all consumers receive because credit unions are tax-exempt far outweighs the "cost" to the government.
If credit unions paid income tax, the contribution to state and federal treasuries would not make one penny difference in the taxes you pay as an individual.
All taxpayers have legitimate concerns about the federal budget deficit and state deficits as well. Credit unions and members already share in reducing those shortfalls:
You pay taxes on dividends your accounts earn. The credit union tax status is one of the highest yielding investments the federal government has made.
© 2013 Credit Union National Association Inc. Information subject to change without notice.