Scott Hodge of the Tax Foundation: Be Prepared for Credit Union Tax Fight in 2025

Congress will be looking for ways to pay for tax cut extensions

A critic of the credit union tax exemption predicted Thursday that Congress may take a close look at the benefit as they search for ways to pay for expiring tax cuts next year.

Parts of the 2017 “Tax Cuts and Jobs Act” expire next year and “there’s going to be a rush to look under every [sofa] cushion” to pay for an extension of the cuts, Scott Hodge, president emeritus and senior policy advisor at the Tax Foundation, said in an interview with Washington Credit Union Daily.

The Tax Foundation is a Washington, D.C. think tank that says it advocates for tax policies that lead to greater economic growth and opportunity.

Hodge is a longtime critic of the credit union tax exemption and earlier this year wrote a Tax Foundation report, “After 90 Years, It is Time to Wean Credit Unions off Taxpayer Subsidies.” The report argued that the credit union tax exemption is outdated and that credit unions no longer focus on helping people of modest means.

Hodge also is the author of the newly published book, “Taxocracy: What You Don’t Know About Taxes and How They Rule Your Daily Life.” Hodge devoted a chapter of the book to his argument that the credit union tax exemption should be eliminated.

Discussing the tax benefit in the interview, Hodge said, “I think 90 years of subsidies is enough. If you can’t exist for 90 years without a subsidy, shame on you.” He continued, “You can’t have a healthy commercial banking system competing with a non-profit, tax-exempt banking system.”

Hodge insisted that he is not singling out the credit union tax exemption. “My friends in the credit union industry think I’m picking on them but I’m not,” he said, adding that he has made similar arguments about non-profit hospitals.

He acknowledged that the issue has not been widely debated on Capitol Hill in recent years. Last year, Rep. French Hill, R-Ark., vice chairman of the House Financial Services Committee, questioned National Credit Union Administration Chairman Todd Harper about tax-exempt credit unions purchasing for-profit banks.

The NCUA produced statistics that showed that in recent years, there were many more bank mergers than there were credit union-bank mergers. Hill has not raised the issue since then, but he is one of the candidates who will vie for the top Republican spot on the Financial Services Committee next year, so the issue may gain prominence then.

Hodge said that given the number of credit unions across the country, eliminating the tax exemption may be a tough one for members of Congress. “It’s like post offices,” he said. “Everybody has one.” And many members of Congress do their banking at the Congressional Credit Union, he noted.

Hodge admitted that battling over the credit union tax exemption is a difficult issue to tackle. “I think there are some people on Capitol Hill who understand it,” he said, later adding, “Credit unions have created an image of themselves like motherhood and apple pie.”