Credit union tax exemption is a “least worst” option to increasefederal government revenues, according to the Tax Foundation, a Washington-based tax think tank.

The conservative-leaning group Wednesday published a reportentitled “Raising Revenue: The Least Worst Options” that namedcredit unions three separate times as a way lawmakers could reducethe federal deficit as they negotiate fiscal cliff solutions.

The report is replete with banking lobby talking points, charging thatcredit unions “compete directly with private businesses but havethe advantage of not paying federal income taxes” and estimated thevalue of the “tax benefit to credit unions” at $2 billion to $3billion per year.

The report did not mention the tax-exempt Subchapter S charter enjoyed by roughly one-third ofall banks, which was valued at $2.05 billion in the 2010 federalbudget, compared to the $1.27 billion credit union tax expenditurethat same year.

Tax Foundation President Scott A. Hodge also erroneouslyincluded credit unions among Government Sponsored Enterprises andfederally owned businesses, saying they should be required to payfederal income taxes.

NAFCU Executive Vice President of Government Affairs Dan Bergerfired off a response letter to Hodge Dec. 6 that called the reporta “myopic perspective of including and singling out creditunions.”

Berger wrote in the letter that “credit unions are no more'federally owned' than the Tax Foundation is 'bank-owned,' ascredit unions are not-for-profit cooperatives owned and operated bythe millions of Americans who are their members.”

He also countered the reports claim that the credit union taxexemption is worth $2 billion to $3 billion annually, sourcing a2010 Senate Budget Committee Report that put the estimate closer to$500 million for fiscal year 2013.

John McKechnie, partner at Washington-based lobby firm TotalSpectrum, called the report a “disturbing misread” of the creditunion tax exemption and said the Tax Foundation should knowbetter.

“If nothing else, this is a reminder that we're in anenvironment that calls for vigilance when it come to the taxexemption,” McKechnie said.