Grover Norquist Chooses Credit Unions over Community Banks

Grover Norquist, the President of Americans for Tax Reform, has sided with credit unions over community banks.

In a June 5th e-mail to members of Americans for Tax Reform, Grover Norquist encourages his members to contact Congress about protecting credit unions by opposing any attempt to repeal their tax exempt status.

Grover Norquist in justifying his organization's position stated: “Credit unions are superior to banks in many local communities because they are essentially owned by the customers, not a board of elites.”

However, it seems that Norquist does not understand community banking.

Community banks are the foundation of their local communities. They obtain their retail deposits locally and make their loans locally. Community banks are in most cases locally controlled by individuals from their local communities, not "elites."

Norquist claims that "credit unions are often the only source of financing for disadvantaged communities."

But the evidence indicates that the credit union tax exemption is not going to people of modest means. A 2006 Government Accountability Office (GAO) found that credit union lag behind banks in serving people of modest means (low- and moderate-income customers). GAO also found that 49 percent of credit union customers were of upper-income compared to 41 percent for banks.

Moreover, Norquist claims that if liberals and big government politicians repeal the tax exempt status of credit unions, this would make it nearly impossible for hardworking Americans to achieve financial independence.

However, advocating for the preservation of the credit union tax exemption, which is considered a tax expenditure for budgetary purposes, smacks of big government that Grover Norquist opposes.

Economists view tax expenditures as distorting economic activity, increasing the complexity of the tax code, and violating principles that businesses with similar characteristics should be treated equally.

For a group calling itself Americans for Tax Reform, supporting the continuation of the credit union industry's preferential tax treatment certainly doesn’t sound like “tax reform” to me.