According to a survey of 5,000 credit unions by the Credit Union National Association, approximately 650,000 customers have joined a credit union, since September 29.
This just illustrates the point that many tax-exempt credit unions have evolved into direct competitors with taxpaying banks and should have their preferential tax treatment revoked.
The principle of tax equity states equals should be treated the same by the tax code. Therefore, institutions that are engaged in the same lines of business and are in competition with one another for the same customers should be subject to the same tax treatment.
For example, Congress in 1951 repealed the tax exemption for cooperative banks and mutual savings associations because it found that these institutions were in active competition with taxable institutions and continuing their tax exemption would be discriminatory.
Additionally, the President's Economic Recovery Advisory Board (PERAB) last year came to the same determination when it set forth as a policy option the repeal of the credit union tax exemption. PERAB wrote:
"Unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income. This puts them at a competitive advantage relative to other financial institutions for tax reasons. Eliminating this exemption would raise revenue and level the playing field, but would clearly raise taxes on credit unions."
So, the potential legacy of Bank Transfer Day may be the demise of the credit union tax exemption.