As the Trump administration searches for cost savings to address federal budget deficits, it is time to reexamine credit union tax subsidies that cost taxpayers billions each year, former FDIC Chairwoman Sheila Bair wrote in an opinion column for the Washington Post. (Subscription required.)
Credit unions have been abusing their tax-exempt status to expand beyond their mandate of serving low- to moderate-income communities with common bonds, Bair wrote. They have been acting more and more like for-profit institutions, generating additional capital from investors, purchasing the naming rights of major sports stadiums and purchasing private planes for their executives.
Credit unions also used their non-taxed income to purchase a record number of community banks last year, including the bank that Bair uses. “These local banks contribute roughly $15 billion in tax revenue each year, revenue which is reduced each time a community bank is assumed by a credit union,” she wrote.
“Credit unions once played an important and proud role in serving strongly associated, well-defined underserved communities. Many still do, and for them, tax benefits could be preserved,” Bair wrote. “But too many have been egregiously abusing their tax benefits, costing the government needed tax revenue while creating even more challenges for community banks, which already struggle with excessive regulatory burdens. Policymakers should at the very least use this year’s debate over tax reform to take a fresh look at credit union policies.”
