Despite years of complaints by the banking and savings and loan industries that tax-exempt credit unions have an unfair competitive advantage, a new Government Accountability Office study shows banks continued to dominate.
The report, conducted at the request of Senator Bernie Sanders, found that bank profits have grown by more than double the rate of net income at credit unions. Moreover, 31 percent of banks and thrifts are now organized to avoid corporate taxation.
The report found that banks received $108 billion in tax deductions and $200 million in tax credits in 2004 alone. By comparison, the Treasury Department has estimated that the value of the tax-exempt status for credit unions will total only $1.4 billion this year.
"This study provides conclusive evidence that all the moaning and groaning by the big banks about unfair competition from credit unions is unfounded. The big banks' profits are going up and up, as is the compensation of their CEOs, while credit unions have remained focused on providing financial assistance to middle-class and working families. The benefit that Americans get from credit unions outweighs by far the cost of the credit unions' tax-exempt status," said Sanders, who requested the study last July.
The independent investigative arm of Congress also found that:
- Thirty-one percent of all banks paid no corporate income taxes at all by becoming Subchapter S corporations.
- In 2006, banks and thrifts received $146 billion in profits compared to a mere $6 billion in retained earnings for the entire credit union industry.
- Compared to the previous ten years, banks and thrifts experienced double the earnings growth rate of credit unions in 2006 after adjusting for inflation.
- Some banks, like BB&T, have evaded millions of dollars in U.S. taxes by setting-up illegal tax shelters.
- From 1992-2000, average direct compensation for bank CEOs more than doubled, according to a recent report.
- The cost to American taxpayers for bailing out the Savings and Loan Industry in the 1980s has grown to more than $200 billion in today's dollars.
"Instead of questioning the tax-exempt status of credit unions, which have helped millions of members with lower fees, reduced interest rates, and better service, the American public would be much better served if Congress took a serious look at the escalating fees, economic concentration, and CEO compensation packages that big banks are receiving," Sanders said.
"As documented by the GAO, big banks are right about one thing: there is not a level playing field, but the big banks seem to have the advantage. I hope that Congress will listen to the evidence in this report and finally ignore the pleas of big banks to undermine credit unions."
The full report is available online at https://www.sanders.senate.gov/files/d07593r.pdf