After President Trump signed H.R. 1 into law, working Americans won a quiet but critical victory — one that protects their wallets, their communities, and the institutions they trust. We owe a special thanks to Congress who stood firm against a powerful lobbying push from Wall Street banks to impose a new tax on credit unions.
As the bill moved forward, behind the scenes banks seized the chance to try to pad their profits. They lobbied hard to strip the longstanding federal tax exemption that credit unions pass to members in lower fees and rates on checking, auto and home loans, and better rates on savings. If the banks won, it would have hit millions of American workers with an indirect tax increase by raising their banking costs while cutting services they depend on.
Congress stood up for credit unions and protected the industry’s not-for-profit tax status—recognizing the credit union difference and impact credit unions have on people and communities.
But credit union members from across the nation should beware that while we’ve won a major battle, the fight isn’t over, and we have much to protect and still achieve.
The 4,500 credit unions in communities across America are unique in the financial world. They’re not-for-profit, employer-sponsored, member-owned, and cater to workers. With more than 144 million members, credit unions serve 43 percent of all Americans. Over 90 percent of members trust their credit union. And that trust is well-grounded.
Credit unions are a good deal for workers. Credit unions started in the U.S. over 100 years ago when banks refused to serve working Americans. Families, farmers, small business owners, and others that the banks left behind needed alternatives. That initial community of need has grown over the years, now including roughly 4,500 credit unions nationwide, with over 180 credit unions dedicated to meeting the needs of 40 million service members, veterans, and their families.
They’re locally based, so they know their members and offer personalized service. Most are small but punch above their weight. Their mission is to serve their communities. Credit unions have volunteer boards, reinvest profits to lower member banking costs, and even pay members dividends. They pay various federal, state, and local taxes.
The banking industry, in contrast, is dominated by large corporations. Bank earnings totaled $270 billion last year, nearly 20 times the combined earnings of credit unions. They charge more for checking accounts and auto and home loans and pay less on savings. Customers feel treated like numbers. And that feeling is reflected in the fact that Americans trust banks less than credit unions.
Banks also pay dividends — but not to member-customers.
The banks claimed their push for new taxes was to fight unfair competition, despite holding over 90% of industry assets. But their solution wasn’t to improve service or reduce costs. It was to hobble credit unions. That’s not competition. That’s corporate protectionism.
Credit unions are an important component of our strong financial system. As the original consumer protectors, the checks-and-balances they provide to other institutions is clear: A 50% reduction in the credit union market share would cost bank customers an estimated $22.8 billion a year in higher loan rates and lower deposit rates. Changing the credit union tax status would cost the U.S. economy $33 billion in lost income tax revenue over the next 10 years, reduce the GDP by $266 billion, and eliminate 822,000 American jobs.
Thanks to credit union champions in Congress, working Americans still have a choice. They can still bank with people who know them—not just their account numbers. They can experience the credit union difference.
And that’s something worth defending.
Jim Nussle is the president and CEO of America’s Credit Unions.
