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Credit union tax exemption falls into category agency claims is in need of review.
The federal government must develop a comprehensive fiscal plan, which should include an examination of the effectiveness of tax expenditures—a budget category encompassing the credit union tax exemption—the Government Accountability Office (GAO) said Thursday.
The current budget path is not sustainable, and all aspects of federal spending and taxes should be examined, the GAO claimed in its annual review of the fiscal health of the nation.
“An effective fiscal plan would support the difficult policy decisions needed to achieve a more sustainable fiscal policy, one where publicly held debt is stable or declining relative to the size of the economy,” the office stated.
Agency Claims Information on Tax Expenditures is Lacking
The government watchdog agency maintained that when policymakers are forced to make difficult decisions, they should have the information needed to justify their choices.
The federal government currently does not have that data for tax expenditures, the GAO said, noting that in FY21, those expenditures reduced income revenue by about $1.4 trillion.
The agency also noted that as far back as 2016, the accountability office recommended that the Office of Management and Budget (OMB) work with agencies to determine which tax expenditures meet agency goals. The OMB agreed with the recommendation but has yet to take any action on it.
“Absent such analysis, policymakers have little way of knowing whether these tax provisions advance their intended outcomes and have limited information to compare their cost and efficacy with other policy tools,” the GAO stated further.
The agency has revealed it intends to closely examine tax expenditures within the next five years but has not set a definitive deadline for it.
How Credit Unions Could be Impacted
The credit union tax exemption is a comparatively small tax expenditure when compared with others. The Biden Administration’s FY23 budget estimates that between 2022 and 2031, the credit union tax exemption will result in $25.330 billion in lost tax revenue.
Congress has shown little interest in examining or adjusting the tax exemption even though banking trade groups continue to urge members to do so.
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