The credit union industry has strayed from its original tax-exempt purpose and its tax exemption can no longer be justified, according to a research note published on October 16 at the nonpartisan Tax Foundation.
“Ending the exemption would make the tax code more efficient and provide lawmakers with revenue that could be used to offset other improvements in the tax code,” Erica York, an economists at the Tax Foundation.
York noted that the credit union tax exemption was historically justified by three purposes: serving customers with a common bond and customers with moderate means, as well as providing services difficult to obtain at banks. She cited evidence showing the erosion of common bond, that credit unions are increasingly serving high-income customers and that their services now resemble those offered by banks.
“The tax exemption for credit unions is not justifiable under principles of sound tax policy, nor under the rubric that lawmakers have used in the past to evaluate the tax-exempt status of financial institutions,” she concluded.
Read the research note.
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How convenient. Find a banker to write the study. Good job.
ReplyDeleteCredit unions were founded originally as community organizations. The common bond came into play in the 30s, 40s and 50s when large employers were the norm. CUs are going back to community focus.
When banks sell themselves to larger organizations (to generate returns to the shareholders which is NOT bad), credit unions are left as the only local financial institutions.
When the larger multi-state banks charge high fees (their right to do so), some consumer choose to bank with a more local, cost-effective institution with branches in the community. Credit unions are still doing what they have been doing for decades.
They have gotten larger because of the regulatory requirements imposed because of the failure of banks to do what is right (Riggs and US Bank just to name two - BSA and privacy), those costs must be brought to a minimum to provide the services consumers want.