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HARRISBURG, Pa. – An editorial in the week of Oct. 18th issue of the Philadelphia Business Journal got it right when it stated that credit unions are a low-cost option for financial services, but Pennsylvania Credit Union Association President/CEO Jim McCormack let the newspaper know it “missed the mark on several other issues.” One of those issues, McCormack stated in his letter to the editor that ran in the week of Oct. 25th issue of the newspaper, is credit unions have an unfair competitive advantage because they’re exempt from paying income taxes. “As you noted, credit unions are non-profit, owned by our members, democratically controlled and run by volunteer boards of directors. Credit unions return every penny earned to their members, not just stockholders. This can be seen in lower rates on loans, higher rates on deposits and lower fees. As for the tax advantage, Congress has recognized since 1934 that credit unions are worthy of an income tax exemption, but we do pay payroll taxes, real estate taxes, and most other taxes,” McCormack wrote. He also pointed out several disadvantages to being a credit union such as field-of-membership limitations, the inability to obtain capital by selling stock, limitations on investment authority, and restrictions in commercial lending. “If being a credit union was such a great deal, why have no banks switched charters,” he asks. “Because banks are for-profit, it is in their economic interest to eliminate credit unions, which is why they raise the taxation issue,” McCormack wrote. “Banks have and continue to make record profits. Without credit unions in the marketplace there would clearly be less competition, and the cost of financial products and services would be higher for all consumers.” Responding to the editorial’s statement that “We do not want to see credit unions pay income taxes, but there is a basic issue of fairness here that should put the lid on their efforts to expand charters,” McCormack wrote that “As credit unions, we agree that credit unions should not be taxed (which both President Bush and Senator Kerry agree upon), but we disagree that any competitive advantage exists.” McCormack concluded his letter to the editor writing that, “Credit unions provide a marketplace alternative that is valued by many consumers and should be more readily available, not less.”

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