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Congress seeks Trumpís support for investment in distressed communities
Kirill Abbakumov   on Thursday, March 16, 2017 at 8:00:00 am

Congressional lawmakers in both chambers aim to obtain support from President Donald Trump for new incentives to help economically distressed communities. Since the beginning of 2017, a group of Republicans have been working to pitch tax incentives for financially troubles areas to President Trump and other administration officials.

They are echoing Trump’s calls to revitalize areas with economic woes while the president develops his legislative agenda, including a tax outline slated for release in several weeks. According to a 2016 Distressed Communities Report by the bipartisan think tank Economic Innovation Group, 50 million Americans live in economically distressed areas. The bipartisan bill entitled Investing in Opportunity Act (S.293) would allow investors to put money – with a deferral of capital gains – into new investments in opportunity zones to be chosen by governors based on criteria such as low median family incomes or poverty rates of 20% or higher. Republicans support the initiative and are proposing several ideas, including a plan to put 10% of rural development funds into areas with poverty rates of at least 20% over the last 30 years.

Other lawmakers are pushing a draft version of longstanding proposal to cut taxes for families and businesses in economic freedom zones, as well as a bipartisan proposal (H.R.1098) to permanently extend the popular New Markets tax credit for investment in low-income communities. That credit expired in 2019. Under the 17-year old New Markets program (PL 106-554) run by the Treasury Department, investors can claim a tax credit for 7 years that equals 39% of the investment in approved community development corporations.

While tax incentives were not emphasized in the anti-poverty plan contained in the House Republican’s “Better Way” agenda, which called for work incentives for welfare and other benefits, there is a chance that President Trump will revive themes he outlined last year. In an October 2016 speech in Charlotte, NC, Trump vowed to “propose tax holidays for inner-city investment and new tax incentives to get foreign companies to relocate in blighted American neighborhoods,” and suggested a “federal disaster designation for blighted communities” to spur redevelopment.

Yet while President Trump might be serious about doing something for economically distressed communities and reorienting government policy towards encouraging business development instead of government spending, proposals to aid distressed communities have a mixed record in terms of longevity and enactment on Capitol Hill. Trump must be aware that benefits provided by such programs have withered over time. A number of incentives for empowerment zones expired at the end of 2016, including tax-exempt bonds, an employment tax credit, and more generous business licensing.