Okay, first of all, I get it.
There is a stigma about kids who don't 'love' reading. I think a lot of this comes from what we hear in comparison to reading ability. Much of it is damning. One mom I know was turned off by a private school because the director/principal stated that there was a pregnancy rate which corresponded with illiteracy in third grade. In third grade, a child is only 8. For some kids, reading doesn't really fluently kick in until they are older. There are a lot of different reasons for this, including vision disabilities and other hidden concerns which can be treated therapeutically, but without evaluation and detection can go unresolved. I say this as a mom with a kid who has some vision issues which glasses or therapy will not resolve. He has to work harder at seeing in the close field (within 6') than some kids do.
That said, in the many years I have worked with young children, attention during reading can manifest in different ways. With my preschoolers, I often created interactive moments during reading a story-- asking a question, having the children make a physical motion a character in the story might make or allowed them something to handle. Some of the kids needed to be doing something, and I offered fine-motor activities then, lacing cards or large beads or read to them while I had the playdough out. For one very active group of kids, their ability to sit and listen was short and so I read some of our longer stories when they were otherwise engaged in some soothing, creative play.
I tell you this because your little ones are still little. I'd be thoughtful about how you spend your book money; hit the thrift stores, many of them have very good children's books if you look around and the libraries often have resale shops.
Having your son read aloud is great, and I would encourage you to keep doing this. As a parent, you can really learn your son's level of ability just by being present as he reads, helping him with words which may be hard to decipher, esp. multi-syllabic ones. Sometimes for a kid, hearing a written word spoken solves the mystery; we do want to encourage them with their word attack skills while helping them to keep the reading light and easy and fun. I have an only child, but when I was a nanny, while a child was reading I would encourage the other child to listen, to play quietly, or to wait until we were finished with our reading time. Treat it like a special time: sit together as a family; this can be your older child's contribution. Don't pass up this opportunity.
Does your library have a summer reading program? This is something my 7 year old loves. We record his reading time and he gets to turn it in for a prize and eventually, a tee shirt. It's fun to see all the other kids with their summer reading shirts once school resumes.
Something which also helps is my reading aloud at bedtimes and when we have some extra time. We're reading "On the Banks of Plum Creek" right now as well as some Batman books, Lego books and he's been enjoying Captain Underpants as well. It's great that you are being receptive in finding books your sons would like. I have one book that I read (one of my choice) but the rest are his choice.
One thing I would suggest is to try out your library online. I know you are worried about fines, but I also feel your older son might benefit from having some choices. You could just be diligent about putting library books up immediately after reading-- use bookmarks. Our son has a great home library of rich writing and fun stories, however, our county library has been a rich resource in finding books he really loves.
Here's something else to consider: you can have your three year old help to repair the books you own. Don't replace them. Teach him, give him appropriate things to rip, like newspaper or recycling stuff. Teach him to ask for something to rip. A child that age can ask "want to rip".
I have found that if you just start doing something, kids will follow. If you ask, they will take the opportunity to say no, often because they can. Esp 3 year olds. So, it might be wise to just sit down and start reading aloud a children's book which interests you, even if only to yourself. I've done this on more than one occasion. It's sort of fun to peek up and see how individual children respond to this-- some keep on working at what they are doing and some will stop and become curious about the illustrations. Reading can be fun if you choose to engage in it despite their ambivalence
As I stated before, don't feel bad if your kids don't look 'typical' as readers. The more I'm around kids, the more I see there really is a broad spectrum of ability and interest in this area. If your boys aren't into reading, simplify bedtime and just have them play quietly for a while-- that's okay too. Each family should do what is best for them.
ETA: I do need to say that I agree with the 'we don't tolerate ripping' sentiment some other mothers proffered. That can be dealt with by finding cheap board books at thrift stores and by sitting with him when he has a more vulnerable book and giving guidance. Repairing books is part of the 'making amends' process, but if it's done in the moment and then the book is immediately put up, the kid gets the message-- you don't get to hear the rest of the story if you rip the book.