Lawmakers have put all sorts of tax breaks on the chopping block in an effort to streamline the tax code and lower rates across the board. While everyone from families to university endowments will feel the change, one industry is aggressively pushing Congress to protect their tax exemption, the credit union industry.
It’s no wonder they’re fighting so hard this time around. The idea of nonprofit credit unions is antiquated and absurd. More and more Americans are tired of Congress rigging the tax code to pick winners and losers in the marketplace. And people are waking up to realize that the credit union industry today isn’t the mom and pop industry they portray themselves to be. The modern credit union industry behaves like any other Washington special interest group — asking for taxpayer benefits at the expense of everyone else.
Congress created not-for-profit credit unions during the Great Depression in order to fill voids left by failing banks and to make loans more readily available in tough economic times, especially in rural communities. Today, however, stable banks are in every town in America, and the growth of online banking ensures that even the most isolated Americans have access to banking services.
Rather than operating as simple neighborhood associations, many credit union are now billion-dollar operations with hundreds of thousands of “members.” Credit unions were established to serve small groups or communities united by a common bond. As a result, credit unions members had to meet certain eligibility requirements to join – like worshipping at a certain church, working at a particular company, or joining a local union.
In recent years, those membership requirements have been blatantly ignored. Ludicrously, the Colorado-based Elevations Credit Union, which was established to serve faculty and staff at the University of Colorado Boulder, now lists “being human” as its sole membership requirement. The influx of customers – excuse me, I mean “members” – through these shady tactics have meant big bucks for credit unions.
Almost 300 U.S. credit unions maintain more than $1 billion in assets. These huge credit unions provide the same services as banks, but while banks pay about 29 percent of their revenue in federal income taxes, credit unions don’t pay a cent.
Rather than using the tax savings to lower costs for customers or improve services, credit unions often dump that money into bloated CEO salaries, questionable sponsorship deals, and even purchasing for-profit, private banks.
In 2014, Eastman Credit Union paid its CEO more than $9.2 million. His salary was funded, in part, by the $23.5 million in fees the credit union charged its members. Eastman Credit Union is based in Kingsport, Tennessee, where the median income is less than $31,000 a year.
Colossal salaries are not uncommon in the credit union world. The CEO of Delta Community Credit Union in Georgia pockets $1.2 million annually. Tampa-based Suncoast Credit Union squeaks by on a $1.1 million salary. The president of Vantage West Credit Union in Tucson raked in $917,000 last year, according to the Form 990 documents credit unions submit to the IRS.
These eye-popping salaries seem like spare change compared to the money credit unions spend sponsoring sports teams. Golden 1 Credit Union Paid $120 million for the naming rights to the Sacramento Kings arena. San Jose State University’s football field was renamed Citizens Equity First Credit Union stadium in exchange for $8.7 million of its members’ money. Tampa-based Suncoast Credit Union spent $5 million to get its name on an arena at Florida SouthWestern State College.
Large tax-exempt credit unions even use their untaxed dollars to gobble up their tax-paying competitors. Over the past 18 months, credit unions bought out seven banks. This troubling trend of turning banks into credit unions shrinks the tax base, forcing America’s taxpayers to shell out more in taxes, while rich, huge credit unions continue to get a free ride.
Many lawmakers claim they want to close loopholes and find additional revenue sources so taxes could be less burdensome. If they’re serious, the first thing it should do is force colossal credit unions to pay their fair share.
David Williams is the President of Taxpayers Protection Alliance in Washington, DC.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.