A former North Carolina textile converted into an office and research facility with the help of New Markets Tax Credit funds. Photo from WNC & Associates, Inc.
Imagine your government had a program that created jobs, helped develop economically depressed neighborhoods, and managed to earn money for the treasury year in and year out. That sounds like the type of program you'd want them to continue, especially in the middle of a weak recovery, doesn't it? Well, as Bill Bradley at Next City writes, we do have such a program: New Market Tax Credits, or NMTC for short. And after consistent success for the past 13 years, it's on Congress' chopping block for next year's budget. Because why not, right?
The NMTC program works by subsidizing development in areas where private capital is generally unavailable, and is estimated to have created 550,000 jobs and leveraged $60 billion in private capital since its inception in the year 2000. And it's accomplished this all while making the government additional revenue. (Bradley has a more detailed description of the program in his article.)
As the New Market Tax Credit Coalition notes, in 2010 the program cost the federal government $720 million in bypassed revenue, but projects built with NMTC funds generated $1.1 billion in federal taxes alone, to say nothing of state and local taxes or the inherent benefit of additional jobs. In other words, the government is getting $1.50 back for every $1 it chips in, and we're considering pulling back on these investments. The rational (i.e., profit maximizing) approach would be to increase funding to at least the level where an additional dollar of investment yields exactly a dollar of returns, and that's assuming we put zero value on state and local tax revenues, job creation, or the human costs of unemployment and under-investment. Instead of considering eliminating its funding, we should be spending far more on this program than we currently do.
Those who believe this tax credit is some form of corporate welfare misunderstand its purpose: the NMTC exists to fund projects that wouldn't go forward without government assistance, so eliminating it will only lead to reduced federal revenue and further disinvestment in distressed areas. My boss has a saying for these types of programs and the tax revenue they generate: 50% of something is better than 100% of nothing. Congress is setting us up to get 100% of nothing, and many of our nation's most neglected neighborhoods are going to pay the consequences.