The loss of the credit union tax exemption would result in a $56 billion loss in income tax revenue over the next ten years, according to a study commissioned by the National Association of Federally-Insured Credit Unions.
“The benefits of credit unions are vital to many communities, and the loss of the federal income tax exemption would have far-reaching consequences,” the Interindustry Economic Research Fund said, in a report issued Monday during the first day of NAFCU’s “Congressional Caucus.” The Fund is a research group located in College Park, Md.
NAFCU officials are touting the study during the conference.
“As not-for-profit cooperative financial institutions, credit unions have always put their members first by providing them with the best financial products, rates, and lower fees,” said NAFCU President/CEO B. Dan Berger, “The tax exemption status provided to credit unions has yielded dividends to consumers, Main Street businesses, and the U.S. economy through lower fees, better financial products, and better rates.”
Banking trade groups have cited the revenue lost as a result of the credit union tax exemption. The congressional Joint Taxation Committee estimated that the federal government will lose $10.1 billion between 2020 and 2024.
Interindustry said that does not tell the entire story. The group reported that in its study, the benefit of the credit union tax exemption was determined by adding the benefits of the credit unions and the benefits of banks.
In its report, Interindustry also reported that if the credit union tax exemption is repealed:
- The Gross Domestic Product would be reduced by $120 billion over ten years and employment would drop by almost 80,000 jobs during the same time period.
- The drop in personal income would lead to a loss of $5.6 billion in federal tax revenue during the next decade.
- In many markets, credit unions offer interest rates that are superior to banks. “The benefit of those better rate offerings extends beyond credit union members to bank customers as well, due to increased competition,” Interindustry said. “The presence of credit unions not only helps members get better rates, but also serves as a check on the interest rates banks offer their customers. The group went on to say that, “Several studies have shown that banks respond to credit unions (as they would to any potential substitute product) by making their loan and deposit rates more attractive.