Credit unions and banks: the tax debate
unions don't pay taxes. But should they?
E. David Locke, president of the small McFarland
State Bank in suburban Madison, Wis., says yes. Mark Wolff,
Sr. Vice President of Communications for the Credit
Union National Association, and Cherie Umbell, spokeswoman for the National
Credit Union Administration, an independent federal agency that
supervises and insures federal credit unions and state-chartered
credit unions, say no.
Credit unions act like taxpaying financial institutions,
complains Locke, "without the little inconvenience of paying taxes."
"Credit unions are federally tax-exempt because
they are cooperatives," says Umbell. "Members are borrowing their
own money and that of their friends. People of small means have
a place to go to save and borrow and better their lives. We are
not there to make a profit the way banks are set up."
"Baloney!" counters Locke. "What galls me is
when they sing that hymnal that they are not for profit. They've
got to come clean on reality."
"Oh, come on," laughs Wolff. "Banks keep complaining,
yet this is the seventh straight year they've reported records profits."
Umbell adds, "If banks are complaining they have no money, then
stop paying your board of directors."
The lines between credit unions and commercial
banks are blurred and indistinguishable, says Locke. "They offer
the same array of products and services. And credit unions have
access to all the government agencies. Plus they don't pay tax!
They've got an obligation, a duty, to pay their taxes. I do."
What angers bankers is the bottom line. "My
bank paid $348,000 in state and federal taxes last year, on $70
million," Locke reveals, "and a small credit union, the University
of Wisconsin Credit Union, made $370 million and paid zero taxes."
Canada began taxing its credit unions in 1972
and Australia began taxing credit unions in 1993, and bankers' associations
are quick to point out that credit unions in those countries continue
"Credit unions are all things to all people.
All perks and no responsibility," says Locke, who has testified
before many federal and state legislatures. "They're not nonprofit.
That's a lie. They sing a song that's not consistent."
Woliver is a freelance writer based in New York
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-- Posted: Jan. 19, 2000