Oregon Economists’ Analysis Debunks Bank Lobby Claims about Credit Union Tax Status

An economic analysis of bank and credit union data finds no evidence that state and federal tax policies give credit unions unfair competitive advantages over banks. Credit Unions vs. Banks: The Myth of the Uneven Playing Field was publicly released today, June 7. The economic report can be found on our public website.

ECONorthwest economists Dr. Randall Pozdena and Dr. Michael Wilkerson determined that credit unions’ tax structure has not positioned them to take market share from banks, that credit unions still serve a large share of consumers with modest means, and that credit unions do not unfairly benefit from not-for-profit tax status, all contrary to bank lobby claims.

“Numerous articles and studies have argued that credit unions have become de facto commercial banks and therefore should be subject to corporate income tax,” said Pozdena, a senior ECONorthwest economist and former Federal Reserve Bank economist. “None of these studies have employed rigorous statistical analysis attempting to identify correlated variables or causal factors.”

The report was commissioned by the Northwest Credit Union Association (NWCUA) this spring after the Oregon Bankers’ Association and the American Bankers Association lobbied the Oregon Legislature and Congress to remove credit unions’ corporate tax exemption. Pozdena and Wilkerson evaluated national commercial bank and credit union data from 1948 through 2012, and Oregon and Washington data from 1995 through last year.

The ECONorthwest analysis concludes:

  • Credit unions’ cooperative management model allows them to provide superior deposit and loan rates and greater protection from risk relative to investor-owned banks.
  • Trend analysis shows commercial banks continue to dominate the financial services market in deposit and asset shares; credit unions’ tax structure has not positioned them to harm banks’ market share.
  • Consolidation of smaller credit unions has been a response to the risk and operational inefficiencies of small scale and was not driven by tax policy.
  • Credit unions are continuing to serve Americans with modest savings, with the share of small accounts under $1,000 declining much more slowly than at commercial banks. Conversely, commercial banks’ share of accounts over $100,000 is 240% higher than credit unions’ share.
  • Credit union staff is paid less in salary and bonuses per employee than commercial banks, consistent with cooperatives’ focus on maximizing member benefits.
  • Credit unions’ cooperative financial services model is a consumer-friendly choice. As member-driven cooperatives, efficient decisions are made in the members’ best interests.

“The ECONorthwest study finally brings new, data-driven evidence to counter the bogus arguments the banking industry repeatedly asserts in an attempt to undermine credit unions,” said Troy Stang, president and CEO of the Northwest Credit Union Association (NWCUA). “I hope the Wall Street bank lobby will now focus more on improving their own services to consumers, rather than on trying to harm credit unions and their members.”

Stang noted the Association is asking credit union Directors, staff and members to visit the website introduced by the Credit Union National Association (CUNA), “Don’t Tax My Credit Union,” and connect directly with Congress. All tax exemptions are under the microscope as Congress grapples with the deficit, but the new northwest economic study provides strong support for the exemption.


Questions? Contact Lynn Heider: 503.350.2225, lheider@nwcua.org.

Posted in Financial Education, NWCUA.