Dear Congress: Don't lose New Markets credit in tax reform deal
If you live in rural America and have a heart attack — or stroke — you may be in really big trouble. Over 30 million Americans live more than an hour’s drive from a trauma center and an estimated 673 rural hospitals are at risk of closure, exemplifying a nationwide trend that threatens rural health care access.
Yet an amazing thing happened at Monroe County Hospital in Monroeville, Ala. In 2017, it received a $6 million capital injection to renovate and expand its emergency room and oncology department thanks to a small, but potently impactful, federal program called the New Markets Tax Credit.
Enacted by Congress in 2000 and run by the Department of the Treasury, NMTC has targeted $42 billion in tax incentives that have, in turn, leveraged $80 billion in investment from other sources into some of the places with the highest poverty and unemployment in America. The credit provides a subsidy that allows banks to participate in projects that might not otherwise qualify for financing. Banks can receive a tax credit worth 39% of the investment’s cost over a seven-year period.
NMTC is the source of many happy endings in economically fragile communities. “Everyone wins,” said Bob Jones, whose United Bank financed Monroe County Hospital with NMTC. “Not only does the project create 21 new jobs in a town of 6,100, but the 33,000 residents of Monroe and adjacent Wilcox County get access to better health care, and the project enhances the local tax base.”
In fact, the Treasury Department has used NMTC to promote rural economic opportunity by targeting 20% of its credits to persistent-poverty counties like Monroe County.
But the program now faces a grave threat. The $1.7 trillion tax reform package, which is moving through Congress at breakneck speed, could potentially eliminate the program. While the Senate bill keeps the NMTC intact, the House bill terminates it. House and Senate lawmakers on the conference committee are scheduled to meet today to discuss sweeping changes to the tax code, including the fate of this important credit.
Eliminating the NMTC is short-sighted. An analysis of Treasury Department data found that between 2003 and 2012, NMTC investments generated nearly $118 billion in economic activity, created nearly 745,000 jobs in low income communities, including 457,000 construction and 287,000 permanent full time jobs in nearly every sector of the economy.
What’s more, the federal tax revenue generated by NMTC investments more than pay for the cost of the program. For example, in 2012, NMTC generated $15.2 billion in economic activity, which in turn, generated $984 million in tax revenue, more than enough to cover the $800 million annual cost for the program that year. The 10 year nominal cost to preserve NMTC is a paltry $800 million per year — less than 0.05% of the entire $1.7 trillion tax package.
Just last month, Sen. Roy Blunt, R-Mo., called the program an “effective incentive for the private sector to invest in communities outside the economic mainstream.”
Blunt should know. NMTC has financed 250 businesses, created or retained 42,370 jobs, and generated $3.4 billion in investments in Missouri. For example, Sioux Chief, a plumbing supply manufacturer in a suburb of Kansas City, had outgrown its facility. NMTC financing, provided by Central Bank of Kansas City in 2014, enabled the company to build a new facility and grow from 400 to 550 employees. Without the NMTC financing, Sioux Chief would not have been able to relocate into an inner city neighborhood where unemployment and poverty are high — nor offer new jobs with an average wage of $40,000 to low income residents.
The employees of Sioux Chief are a part of the bedrock middle class that work hard and want to make sure their families not simply survive, but thrive. This is also true of the residents of Monroeville, one of the many, many forgotten small towns across the United States. Both groups were core parts of the populist voter uprising in the 2016 elections. Decades of community development experience have proven that tax breaks alone are simply inadequate to spur economic activity in the most distressed places.
If they don’t preserve the NMTC, Congress could leave communities in need of a real boost at greater risk. The long-term capacity of NMTC to promote economic prosperity in thousands of places like Monroeville and Kansas City is vast.
Based on the facts, supporting NMTC is a “no-brainer” and smart business decision for truly making America great.