FOR IMMEDIATE RELEASE
New Study Finds No Good Reason for $30 Billion Credit Union Tax Exemption
Washington, D.C. (Feb. 28, 2005) - "Under current law, as it is being enforced, there is no good policy argument based on equity or efficiency for maintaining the [credit union] tax exemption."
This is the latest finding from the non-partisan Tax Foundation, after a comprehensive examination of credit union operations while benefiting from tax-exempt status and a favorable regulator environment. The study estimates the federal tax loss from credit unions' special tax exemption will now exceed $31 billion over the next 10 years. "Given the enormous size of the tax subsidy credit unions are receiving, there should be clear and solid evidence that credit unions are fulfilling some unique or extraordinary need in today's highly competitive financial services sector-yet that is not the case," stated Independent Community Bankers of America (ICBA) Chairman Dale L. Leighty, chairman and president of First National Bank of Las Animas, Colo.
"More and more studies are piling up, proving that rapidly expanding mega credit unions have no business being tax exempt and the rest of taxpaying Americans get stuck carrying the burden," said Camden R. Fine, president and CEO of ICBA. "As our nation strives to create a more fair and simple tax system and meet our federal budget needs, policymakers at all levels of government can no longer ignore the large and growing tax losses and inequities posed by the $650 billion credit union industry. I urge President Bush's tax reform commission to take a hard look at this study's credit union findings."
Additional findings include:
- Only 6 basis points of the credit unions 50 basis point subsidy accrues to credit union borrowers through lower interest rates.
- Tax-exempt credit unions continue to grow faster than banks, have little practical limitation on membership, make business loans that increasingly have no limit on who can borrow, how much, or for what purpose.
- There is no evidence that credit unions have turned their tax subsidy into service for low-income people.
- Today the principal justification for the tax exemption is that it already exists.
The Tax Foundation is a nonprofit, nonpartisan research and education organization that has monitored tax policy at the federal, state and local levels since 1937.
The study and executive summary are available on ICBA's web site at www.icba.org.