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Nussle and Bratsakis Respond to Inaccurate Hill Op-ed on CU Tax Exemption

The Hill recently ran a piece by Scott Hodge that inaccurately depicts the credit union industry’s federal income tax exemption. America’s Credit Unions submitted the Letter to the Editor (below) to The Hill to clarify some of Hodge’s erroneous claims and to set the record straight. The publication denied the submission without providing a reason. The Op-ed has been posted to America’s Credit Unions LinkedIn page to ensure consumers are aware of how credit unions positively impact communities across the nation.

By Jim Nussle and John Bratsakis, CUDE

A recent op-ed by Scott Hodge contains a number of inaccurate assertions that must be corrected.  Allow us to set the record straight.

The core argument of Mr. Hodge’s piece – that credit unions are growing and therefore must be taxed – is flawed. It asserts that credit unions are tax exempt because they were created to be small institutions that serve those deemed insignificant by banks – those who are too poor or have too few assets to make the bank money. It claims credit unions should not compete with banks.

This is radically wrong.

Let us quote the Federal Credit Union Act: “Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because they are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors…”

The credit union tax exemption comes from their structure as not-for-profit cooperatives, which puts the interests of their members above profits. Credit unions succeed when their members succeed, and they often go above and beyond to provide services they desperately need. This contrasts with banks, where success means squeezing every penny of profit out of each one of their customers.

Mr. Hodge also cites studies that claim “credit unions increasingly serve upper-income families and have a smaller share of low-income customers than banks.”  However, the unbiased Federal Reserve Survey of Consumer Finance shows the mean income of a credit union member is $99,000, whereas the mean income of a bank customer is $160,000. Even more revealing: The mean net worth of a credit union member is $532,000 compared the mean net worth of a bank customer of $1,276,000 – more than double that of a credit union member.  The facts speak for themselves.

In the end, the fact that credit unions are growing is proof that Americans are recognizing the credit union difference – not proof that credit unions have strayed from their mission. Consumers are tired of banks treating them terribly. Competition is a good thing that benefits consumers and the U.S. economy. Banks fear it and want Congress to take away their competition.

Jim Nussle is president/CEO of America’s Credit Unions.

John Bratsakis is president/CEO of the MDDC Credit Union Association.

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