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Your League's President John Murphy joined a number of others from the credit union industry in praising a recent op-ed piece that appeared in Forbes Magazine. In the article written by Ryan Ellis, the federal tax policy director for Americans for Tax Reform, calls out banks for attacking the credit union tax status as a thinly disguised attempt to "eliminate competition." Ellis' conclusions were similar to those reached several years ago in a report called, "The Economic Impact on the Maine Economy and the Financial Benefits to Maine Consumers of the State’s Credit Unions," which was written by noted, former state economist, Chuck Lawton, Ph.D.
Under the headline "Credit Unions, Taxes, and Dishonest Bankers," Ryan Ellis wrote in Forbes that banks' attacks on the credit union tax status aren't "about fairness, or tax reform, or even good public policy. It’s about one industry player trying to mug a competitor with higher taxes." Ellis went on to say banks are not interested in tax reform: "They are interested in higher taxes on their competitors in order to gain a market advantage." He said if the government were to increase taxes on credit unions, the amount of tax revenue it would generate would be "chump change in Washington." However, he said it would be sufficient to "alter the balance of power in the financial industry."
Murphy applauded Ellis for his "truthful assessment of the banks tired attacks on credit unions, and for his detailed analysis."
The op-ed piece describes credit unions and banks as having "inverse" business models that dictate their tax structures.
As not-for-profit entities, credit unions "are obligated to plow their earnings right back into their customer (‘members’) pockets." Those members pay taxes on the higher interest their credit union pays, or deducts interest payments according to the lower loan rates charged.
Banks pay taxes on the "entity" level. But, Ellis notes, not all banks do: "One-third of banks are organized as S-corporations, and also do not pay taxes on the entity level."
"For an article like this to appear in such a highly regarded business and economic magazine such as Forbes is significant and further indication that the bank arguments have no merit," added Murphy.
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