President Donald Trump recently signed a bill into law that represents a giant step in the right direction toward achieving tax relief for millions of Americans.
In the House of Representatives’ version of the bill, there was one piece missing from the big picture: the need to develop a broader base of taxpayers across the country. Fortunately, the final bill included an easy fix that can create jobs, encourage entrepreneurship and generate more tax revenue for a minimal cost.
{mosads}It is a proven solution that has given hundreds of disadvantaged communities new economic vitality for nearly 20 years, while delivering a positive return-on-investment to the United States Treasury.
As a U.S. congressman representing Oklahoma’s Fourth Congressional District, I co-authored the American Community Renewal and New Markets Act, which President Clinton signed into law in 2000.
The House version of the tax reform bill sought to end this vital tool that has, to date, directed more than $80 billion in private investment to the nation’s most challenged and distressed communities.
The New Markets Tax Credit (NMTC) has helped these communities create more than 275,000 jobs and has financed more than 5,000 businesses, hospitals, daycare centers and manufacturing plants.
Had this portion of the House proposal remained in the final bill, it would have eliminated this important tool for community investment and redevelopment for no reason other than to save $1.7 billion over a 10-year period, a fraction of the value of the private investments that have been leveraged throughout the life of the program.
The NMTC is a critical tool for communities that are committed to fighting crime and blight; successful public-private partnerships like those achieved with NMTC financing have proved effective at replacing urban decay with hope and economic vitality.
In my home state of Oklahoma, since 2003, $579.5 million in NMTC investments leveraged an additional $367.5 million from other sources for a total of $947 million in project financing — including an estimated $99 million invested in low-income and high-poverty urban and rural communities — to 75 projects and businesses in Oklahoma.
Those investments created 7,049 construction jobs and 5,266 permanent, full-time-equivalent jobs.
But this isn’t merely a matter of dollars and cents; the NMTC is a testament to lives transformed for the better. For example, the community of Bristow, Oklahoma — devastated by the loss of more than 1,000 jobs when a Black and Decker manufacturing plant closed in 2004 — desperately needed an economic boost to reverse its economic decline.
One year later, a Tulsa-based aerospace company called First Wave Aviation began looking for a place to build a new manufacturing facility.
With help from a local community development entity and the NMTC, the plant opened in 2005 and is helping rebuild the economy of Bristow by employing more than 125 people, with the possibility of an additional 375 jobs within the next five years.
Without the NMTC, it would have been unlikely that the company would have expanded its operations and made a multi-million-dollar investment in such a small, rural and impoverished community. Investors would have found the risk to be too great as opposed to investing in an urban area such as Tulsa or Oklahoma City.
These success stories of triumph over adversity and perseverance in rebuilding the American economy have been repeated in every U.S. state since the NMTC took effect in 2000. From health-care facilities in Georgia, community centers in Utah and high-tech manufacturing plants in Iowa, the NMTC touches the lives of millions of Americans in both urban and rural communities.
In 2016 alone, the NMTC program generated $8 of private investment for every $1 of federal funding, created more than 178 million square-feet of manufacturing, office and retail space and financed more than 5,400 businesses.
The program prioritizes and rewards private investment where it’s needed most; more than 74 percent of NMTC investments have been made in highly distressed areas. These are cities and towns with low median incomes and high rates of unemployment, and NMTC investments are having a dramatic impact on the economic health of these communities and their residents.
While I agree that tax reform is a critical priority for the country, I believe it would have been a mistake to eliminate this essential piece of the economic development ecosystem at a time when the economy is gaining steam.
In terms of return-on-investment, it doesn’t take an economist to realize that eliminating the NMTC simply doesn’t make fiscal sense.
Former Rep. J.C. Watts, Jr. (R-Okla.) is chairman of the J.C. Watts Companies and founder and chairman of Watts Partners, a boutique government affairs firm headquartered in Washington, D.C. Watts is a leading national advocate and expert voice in support of creative, inclusive economic development strategies including the New Markets Tax Credit, which he co-authored as a member of the House of Representatives during the 103rd Congress.