CUNA President and CEO Dan Mica Comments on Inaccuracies in Banker-Commission Study on Continuing the Tax Exemption for Credit Unions

February 28, 2005

FOR IMMEDIATE RELEASE
Contact:
Pat Keefe, CUNA
(202) 508-6765; pkeefe@cuna.com
pkeefe@cuna.com

Our initial reaction to this study, prior to a detailed review, is that it holds major inaccuracies in its principal conclusions that pose serious questions as to the credibility of the whole study.

• First, the study substantially overstates the estimated amount that could be gained by taxing credit unions compared to existing estimates prepared and published by the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB).
• Second, the banker-commissioned study incorrectly ties the original justification for the tax exemption to field of membership, rather than the not-for-profit and cooperative structure of credit unions.
• Third, the study totally ignores the preponderance of evidence that credit unions pay depositors much more than do banks, that they charge borrowers much less than do banks and that they charge fewer and lower fees than do banks.
• Fourth, it ignores the effect of banks' use of subchapter S organizations on tax equity.

Credit unions have earned their tax exemption by being not-for-profit financial cooperatives, directed by volunteers, which provide low-cost financial services to their members - regardless of their size. This study shows absolutely no understanding of what credit unions are, or what they do. For example, credit union members save and earn $6.3 billion a year on the loan rates, savings interest rates and fees they would pay if they did their business at banks instead of credit unions.

Further, bank customers themselves, according to a new study, save $4.3 billion a year just because credit unions influence the behavior of banks, causing them to pay more on savings, and charge less on loans. Were all credit unions subject to income taxation, the maximum revenue to the Treasury would be $1.5 billion per year. If credit unions could be nearly as successful as banks in "managing" their tax liabilities, the amount would be far less than that.

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