|
 |
 |
Mythbusters: Banks vs. Credit Unions Edition
You may have seen the recent barrage of ads placed by one of our local banks touting how proud they are to be paying taxes, and implying that credit unions don’t pay their fair share. This tired argument from our banker friends forgets to mention some important facts.
First of all, credit unions are taxed differently than banks because Congress saw the need to do so. Federal law specifically grants credit unions a federal income tax exemption, as does Iowa state law for state income tax. Unlike banks who are in business to make money for their stockholders, credit unions are member owned (that’s right, you’re an owner!) financial cooperatives. Profits are used to pay higher dividends (interest) for savings, charge lower rates for loans and fees, and offer new services.
Secondly, credit unions do pay taxes. Iowa credit unions pay property and employer related taxes and a moneys and credit tax based on reserves. Ironically, loopholes in the tax laws allow many banks to be taxed similarly to credit unions.
Another issue often raised by the bankers is that credit unions have an unfair advantage because of the tax issue. But the facts betray their grief. Nationally, banks control 94% of deposits, credit unions just 6%. Even when bankers scream the loudest about credit unions, banks continue to earn record profits.
There are structural and philosophical differences between banks and credit unions for good reason. Both business models provide financial services to individuals and businesses. Both do good things for the communities they serve. They just have different reasons for doing so. It’s all about the bottom line. Where does it go? For banks, it goes to their stockholders. For credit unions it goes back to our members and allows for growth by providing new products and services.
Next time you hear a banker complaining about credit unions, offer this suggestion: If credit unions have it so good, why not convert to a credit union? But that’s the banker’s dilemma: To do so they would need to dissolve their stock and make their customers owners, stop paying their board of directors and allow their customers to elect the new board from their customer base, drastically reduce their business lending activities, and transform their business from profit driven to member driven. Well? We’re waiting…
|
|
