As Congress and the Trump administration continue negotiations over tax reform, they should address the tax-exempt status of the credit union industry, a prominent economist wrote in U.S. News and World Report today. “One principle of taxation is treating similar businesses in a similar manner. That does not always happen, and tax reform presents the opportunity to get it right,” wrote Diana Furchtgott-Roth. “For instance, credit unions are exempt from income taxes, even though they function in a similar manner to banks, which are taxed. This makes no sense.”
Furchtgott-Roth — a senior fellow at the Manhattan Institute and an adjunct professor at George Washington University who has previously been chief economist at the Department of Labor — highlighted several instances in which large credit unions and their regulator, the National Credit Union Association, have abused the boundaries of federal credit union laws — including stadium naming deals, loans for luxury items like private planes and boats and acquiring taxpaying banks, a practice that she said “is no different than corporate inversions, except that no company has moved to Ireland.”
“As Congress proceeds with tax reform, members should consider uprooting this outdated exemption and no longer picking winners and losers,” she concluded. “Taxpayers should not have to subsidize a credit union’s name on a stadium, or people’s purchases of aircraft and boats.”
