Opinion: Government should not pick winners, losers in marketplace
Getting the federal government out of the business of picking winners and losers in the marketplace has become a primary focus of President Donald Trump’s tax reform proposals. And Trump is not alone in his belief that government should not give unfair advantages to certain companies and industries.
Nevada’s senior U.S. Sen., Dean Heller, frequently criticizes government programs that favor chosen businesses. According to Heller, the government “must not pick winners and losers.”
House Speaker Paul Ryan slammed then-President Obama for “picking winners and losers in the economy … through tax breaks.” Vice President Mike Pence stated, “Our tax system should not pick winners and losers, but should treat every business, small and large, with the same basic rules.”
With so many important leaders in Washington in opposition to government giving out unfair tax advantages, Congress should turn its attention toward eliminating one of the most absurd examples of favoritism found anywhere in the tax code: The nonprofit status enjoyed by humongous credit unions.
Banks and credit unions are so similar that many Americans can’t tell the difference between the two. Both offer savings and checking accounts, loans, safety deposit boxes, ATMs and online banking. In fact, the only real difference is that banks pay about 30 percent of the money they earn in taxes, while credit unions don’t pay any taxes at all.
Even though credit unions operate almost exactly the same as banks and often have billion-dollar budgets and millionaire CEOs, they are considered “nonprofits.” In fact, the three largest credit unions here in Nevada have a combined total of more than $1.8 billion in assets, but are charities in the eyes of the Internal Revenue Service (IRS), just like the American Red Cross, Habitat for Humanity, the United Way and Goodwill.
The unfair tax advantage goes back to the Great Depression, when Congress wanted to spur the economy by encouraging neighborhood savings and loan clubs. While it may have been reasonable to let small lending clubs in the 1930s skirt by without paying their taxes, huge credit unions of today have about as much business being considered a charity as Walmart or McDonald’s. After all, about 300 credit unions currently have more than $1 billion in assets.
While these credit unions may not pay taxes, they sure don’t behave much like charities.
The Silver State Schools Credit Union, for example, uncharitably charged its customers $24.8 million in interest and fees last year. Carson City-based Greater Nevada Credit Union pays its executive vice president a $644,000 salary, according to IRS records. The president of Boulder Dam Credit Union pocketed $678,000 last year.
Boulder Dam Credit Union also donated thousands of dollars of its customer’s money to the Nevada Credit Union League Political Action Committee (PAC). That PAC money was bundled with cash from other credit unions, and then funneled to politicians. In total, credit union PACs donated about $3 million to congressional candidates in 2016 — likely in the hope that the recipients of all of that cash would prevent credit unions from having to pay their fair share in taxes.
The unfair tax advantage wealthy credit unions receive because of lobbying efforts and well-placed campaign contributions is exactly the type of shady behavior America’s voters hoped to stop when they elected Trump to “Drain the Swamp.”
Now that tax reform policies are taking shape on Capitol Hill, Congress can show it means business when it comes ending the practice of using the tax code to pick winners and losers by removing the nonprofit loophole that allows large credit unions to avoid paying their fair share in taxes.
Drew Johnson is a Nevada resident, who serves as a senior scholar at the Taxpayers Protection Alliance
Support Local Journalism
Support Local Journalism
Readers around Lake Tahoe, Truckee, and beyond make the Sierra Sun's work possible. Your financial contribution supports our efforts to deliver quality, locally relevant journalism.
Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.
Your donation will help us continue to cover COVID-19 and our other vital local news.
Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User