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Credit union tax exemption among expenditures Government Accountability Office says should be reviewed.
The Government Accountability Office (GAO) once again is pressing the Office of Management and Budget (OMB) to study whether tax expenditures—a budget category that includes the credit union tax exemption—are fulfilling their mission.
“To ensure that policymakers and the public have the necessary information to make informed decisions and to improve the progress toward exercising greater scrutiny of tax expenditures, the Director of OMB, in consultation with the Secretary of the Treasury, should develop and implement a framework for conducting performance reviews of tax expenditures,” the GAO said in a letter to OMB Director Shalanda Young.
“Although revenue losses from tax expenditures exceed $1 trillion each year,” the GAO added, “tax expenditures continue to not receive the same level of scrutiny within federal budget processes as discretionary spending.”
Background to the Issue
The recommendation was included in a letter outlining GAO recommendations that the OMB has failed to implement. As far back as 2005, the GAO recommended that the Executive Branch study the effectiveness of tax expenditures.
Several presidential administrations have said that such a study is a good idea but have not taken any action. The GAO itself has said it will conduct a study on its own over the next several years.
Credit Union Tax Exemption
In December, the Treasury Department estimated that the credit union tax exemption will cost the federal government $25.3 billion between 2022 and 2031. That cost is comparatively small for tax expenditures.
The credit union tax exemption is part of an ongoing battle between the banking and credit union industries. Banking trade groups contend that credit unions essentially operate as banks and therefore they no longer deserve to be tax exempt. Credit union trade groups argue that as nonprofit institutions, credit unions use revenue for the benefit of their members.
Specific Recommendations
In the letter, the GAO said the OMB should, among other things:
–Determine which agencies should have the responsibility to review tax expenditures, and how to deal with the lack of credible performance measures.
–Set a schedule for conducting the reviews.
–Re-establish testing methods for the overall evaluation framework.
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