Tax reform is all the talk in Washington these days, and President Trump has stressed that one of his main goals in tax reform is to make taxes fairer by leveling the playing field for all businesses.
The first thing Congress and the president should do if they’re serious about fairness is to stop picking winners and losers in the marketplace using the tax code.
An obvious example of this troubling practice is the unreasonable tax advantage credit unions have over banks. Credit unions don’t pay any taxes at all, while banks pay massive tax bills – even though credit unions compete with banks and provide the same services to customers.
Credit unions are classified as nonprofits – just like homeless shelters, churches, emergency relief organizations and children’s hospitals. But unlike those charities, many large credit unions simply exploit their tax status to provide big paydays to upper management and gain unfair advantages against banks.
Like banks, credit unions offer services such as checking and savings accounts, personal and business loans, credit cards and e-banking. Unlike banks, credit unions don’t pay a dime on the money they make from fees and interest from their customers. While banks often pay 30 percent or more in taxes, credit unions – even behemoth, multi-billion dollar credit unions – pay no taxes at all.
When credit unions make money, they don’t pay corporate income taxes or taxes on capital gains. They buy supplies and pay for services without shelling out sales taxes. Credit unions don’t even pay property taxes. Even though some credit unions own hundreds of branches, state and local governments don’t receive a dime on the billions of dollars’ worth of real estate credit unions own.
Here in Arizona, big credit unions use money they should be contributing to the community to fund fancy trips, swanky conferences and exorbitant salaries.
OneAZ Credit Union has stockpiled nearly $1.8 billion in assets, according to filings with the federal government. The Phoenix-based credit union pays its CEO a salary and benefits package worth $1.1 million a year. The outfit’s COO pockets $600,000 and the CFO earned $503,000 annually. Additionally, OneAZ spends $2 million on advertising, $1.1 million on conferences and $940,000 on travel every year.
The credit union even funds a small lobbying budget, undoubtedly spending money in the hopes of convincing elected officials to keep the tax man away.
Vantage West Credit Union is headquartered in Tucson, where the per capita income is just over $20,000 a year. The credit union’s president rakes in $917,000 a year – 45 times more than the average Tucson resident. Vantage West, which oversees $1.6 billion in assets, also spent $3.2 million on advertising and $652,000 on conferences.
The CEO of Tempe’s billion-dollar TruWest Credit Union collected $1.4 million in 2015, including a deferred compensation package.
There is no reason why these humongous credit unions, with their millionaire CEOs and billions of dollars in holdings, should be treated the same as a small soup kitchen, after-school program or animal rescue organization in the eyes of the IRS.
If Congress is committed to making taxes fairer, lawmakers should start by making large credit unions pay their fair share in taxes, while lowering tax rates for businesses that have been contributing to government coffers year after year.
Lynne Breyer is the administrator for the Arizona Freedom Alliance. Visit AFA online at: www.arizonafreedomalliance.org.