Tax Subsidies for Credit Unions
Your Dec. 6 editorial on credit unions neglected to point out that credit unions operate under a special subsidy from the federal government. They don’t pay federal income taxes. This year taxpayers will subsidize credit unions in the amount of nearly $800 million in lost tax revenue. With a government tax break that big, credit unions ought to obey the law.
The courts have said clearly that a credit union’s members must be bound by a “common bondâ€--not several common bonds, just one. A credit union in Louisiana includes 1,000 employee groups, from hair-salon and horse-farm workers to the employees of a casket company. Where’s the common bond?
Then there was the letter from Judith McCartney, president of the Orange County Federal Credit Union in Santa Ana (Dec 17). She warned--incorrectly--that banks want “to eliminate credit unions.†Not true. We want them to obey the law. Orange County Federal Credit Union, incidentally, will earn approximately $3.9 million in 1996. Were the credit union to be taxed at the normal corporate tax rate, it would pay roughly $1.3 million in federal income taxes. No wonder credit unions offer great rates.
Why should the taxpayer continue to subsidize credit unions, especially those that act like banks? The federal tax break will soon reach $1 billion a year. And, folks, that’s real money.
DONALD G. OGILVIE
Executive Vice President
American Bankers Assn.
Washington