by Roger Wood – from an editorial written by David Outhouse of Greenland, New Hampshire. He is a retired President of a community bank, First and Ocean. I had an opportunity to interview him about the issue of non-taxation of Credit Unions, and his complete editorial is printed below.
Listen
Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.
Talk about Tax Loopholes!!!!!
The view of the new Service Credit Union building under construction on Route 1 in Portsmouth serves as a resounding reminder of the politics of tax loopholes which we all pay dearly to support.
New Corporate Service Credit Union Building - Portsmouth, NH - Photo by Roger Wood
Many people don’t realize that Credit Unions, unlike banks and thrifts, pay no Federal or State Income taxes. Now this may have been an appropriate treatment during the infancy of these organizations, whose original purpose in 1909 was to serve the banking needs of a very distinct and narrowly defined group of lower income individuals who had limited access to regular banking services. However in the current scheme of things Credit Unions have been allowed to evolve through legislative initiatives into mirror images of the banks and thrifts with which they compete side by side for the same customers, business and individual, albeit credit unions do so with the significant advantage afforded to them via their continued tax exempt status.
To add a little perspective the two major credit unions in Portsmouth, Service Credit Union and Northeast Credit Union, have combined total assets of $2.7 Billion and over the last two years earned $70 million in net income—on which they paid zero taxes. In contrast the six community banks who serve Portsmouth have combined total assets of $2.5 billion and earned $38 million over the last two years, on which they paid a combined $13.9 million in federal and state income taxes. Had the same 36.5% average tax burden been applied to the local credit union earnings a whopping $25.5 million would have been added to state and federal tax coffers. Ironically had income taxes applied to these entities their net after tax earnings would have still been almost double that of their community bank counterparts, makes you wonder why they need this pricey accommodation.
On a national scale as of December 31, 2011 United States Credit Unions had total assets of almost one trillion dollars and earnings of over six billion dollars. Taxing them on the same scale as their bank counterparts would annually add over two billion dollars to our tax revenues. Of interest is the fact that our senators and representatives have their own Credit Union—the Congressional Federal Credit Union which has over $700 million in assets and earned over $7 million in income over the last two years, and of course paid no federal or state income taxes. Why do individuals earning over $180,000 per year need subsidized banking services?
As you listen to the partisan bickering in Washington and the rhetoric over closing loopholes to insure all pay their “fair share”, I hear no politician beat the drum to close this most obvious and unnecessary loophole—it would appear that the credit union lobby is very gifted at their job! There is very compelling precedent for elimination of the tax exempt status of Credit Unions. In 1951 Congress eliminated the tax exempt status for Mutual Savings Banks, Savings & Loans and Co-operative Banks, the rational for this vote summarized by the statement that these entities had outgrown their tax-exempt status as they were now “actively in competition” with tax paying banks and financial institutions.
So as you drive past the gleaming new Service Credit Union building remember that it’s your tax dollars, not theirs, which pays for the infrastructure necessary to support our well-being. And if you receive your financial services from a bank or thrift you’re helping pay for 91.8 million others to receive subsidized accounts— including your own members of congress and their staff.
Isn’t it time to end this ridiculous loophole too!!!
Written by David Outhouse, Greenland, New Hampshire.
