By William J. Mellin
I grew up in New York City, where my father was a police officer. When he came home each day, he’d empty his pockets and give whatever change and bills he had to my mother. She saved diligently – often for a whole year – until there was enough for our family to take a simple vacation and get out of the city for a few days.
I tell this story because I know there are countless families across the state, and the country, who are emptying their pockets and saving their change. It may be for a vacation or a home or a college education – or it may be for the next month’s utility bill. But people are doing the best they can with whatever they have because they want to make a better life for themselves and their families.
These are the people credit unions serve every day, and that’s why the work they do is so important. But today, as Congress rewrites the tax code, that very important work could be in danger.
Without support from Congress, there’s a chance that credit unions could lose their federal income tax exemption. It’s a bad idea that would have devastating effects on many of the 96 million credit union members across our nation and the almost 5 million here in New York State. In fact, for every $1 of income tax on a credit union, each member would lose about $10 in financial benefits. That’s $6 billion to $10 billion taken out of the U.S. economy every year – an amount that far outweighs the estimated $500 million to $800 million that would be collected annually by taxing credit unions. Further, New York credit unions already pay hundreds of millions of dollars a year in a variety of taxes, from payroll taxes to school and property taxes.
Credit unions also use their tax status to benefit all Americans. Members benefit from lower rates on loans, lower fees on services and higher returns on deposits. Non-members benefit as well, because credit union competition helps keep bank savings rates higher and loan prices lower.
Put simply, credit unions are exempt from federal income taxes because they are member-owned, democratically operated, not-for-profit cooperatives managed by volunteer boards with a specific mission of promoting thrift and providing members with access to credit. They create opportunities for those who need them most – from senior adults to immigrants to youth. The value and service credit unions provide to their members and their local communities is why, through good times and bad, Congress has always reaffirmed their federal tax exemption.
Given the economic benefits that would be lost – along with the much-needed member services that would be cut – it’s clear that a tax on credit unions is something none of us can afford.
William J. Mellin is president and CEO of the Credit Union Association of New York.