Trump Administration Rejects Recommendation to Study Tax Expenditures

The Trump Administration has placed on the back burner a Government Accountability Office recommendation that a study be conducted on the cost and usefulness of tax expenditures, which presumably would include the credit union tax exemption.

In a letter to the Office of Management and Budget earlier this month, Comptroller General Gene Dorado outlined a series of recommendations the GAO made to OMB that have not been implemented. GAO has sent a series of similar letters to federal agencies during the past few months.

“We have also recommended since September 2005 that OMB develop and implement a framework for conducting performance reviews of tax expenditures, which represent forgone revenue estimated at around $1 trillion annually since 2010,” Dorado said in the letter.

It goes on to state that OMB should work with agencies to determine which tax expenditures contribute to an agency’s goals.

“Such action would help inform policy decisions about the efficiency, effectiveness, and equity of tax expenditures and whether they are the best tool for accomplishing federal objectives within different functional areas,” GAO said.

In a response in January 2018, OMB said it would not pursue the effort because of competiting priorities and resource constraints. In March of this year, OMB said its status had not changed and that nobody is assigned to the projects.

GAO is not backing down.

“We continue to believe that OMB, in collaboration with the Department of the Treasury, needs to assist agencies in identifying tax expenditures that relate to agency goals so that the agencies have a more complete understanding of how a broader range of federal investments contribute to their goals,”  Dorado wrote.

The credit union tax exemption is a relatively small compared with other tax expenditures.

But it remains a but politically charged issue, with bankers arguing that the exemption provides credit unions with an unfair advantage.

The Trump Administration in March estimated that the cost of the credit union tax exemption will be $24.017 billion during the next 10 years—a 33% drop from last year.

Last year, then-Senate Finance Chairman Orrin Hatch (R-Utah) said the tax exemption might be outdated.

However, then-NCUA Chairman J. Mark McWatters said eliminating the tax exemption would have a profound impact on the credit union system

“We believe that eliminating the credit union tax exemption, without also eliminating the statutory restrictions on credit unions, would almost certainly have a detrimental effect on the credit union system and increase losses to the Share Insurance Fund, which could ultimately fall to U.S. taxpayers,” McWatters said, in a letter to Hatch.