Credit Union Taxation Compromise

Deficits and Taxation

In contrast to the tax discussions during the budget surplus year of 1998, when HR-1151 was debated, today deficits are an economic reality. Congress and many state legislatures are likely to be turning over every stone in search of tax dollars.

According to political observers, a proposal resulting in taxes affecting just 10% of the credit unions is plausible. Although numbering less than 1,000, these credit unions are the most profitable and fastest growing. Controlling about 75% of credit union assets, their profile deviates from the median credit union. Many are capturing market share from the smaller 6,800 credit unions, alienating that group. Without their support and facing critics at the highest levels of government, this small group of fast growing credit unions (likely re-characterized as "credit associations") may end up getting squeezed into a box resulting in taxation and only modest new powers. Mutual savings banks had to wait over 20 years after being taxed before gaining any significant new powers.

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