OOPS

[Lee B]

Surprise, Surprise !

 

Big banks and wealthy investors are accused of benefiting from a tax credit program that is supposed to help poor communities, according to a new Senate report.

 

The report, from Sen. Tom Coburn, R-Okla., describes how millions of dollars in New Markets Tax Credits are being diverted to benefit billionaires, major banks, Hollywood producers and fast food chains.

The program is supposed to spur new markets in struggling communities, but Coburn said it is instead subsidizing companies and corporations that have little need of taxpayer assistance, providing financing for projects such as a sculpture in the desert, a vintage car museum, and pet care centers. In at least one case, a project supported with a New Markets Tax Credit is threatening to bankrupt an entire town and eliminate jobs, including the entire police department.

“The New Market Tax Credit is a reverse Robin Hood scheme paid for with the taxes collected from working Americans to provide payouts to big banks and corporations in the hope that those it took the money from might benefit,” Coburn said in a statement Monday. “When government picks winners and losers, the losers usually end up being taxpayers. Washington should reduce federal taxes on working Americans and all business owners who create jobs by eliminating tax earmarks, loopholes and giveaways like the New Markets Tax Credit.”

The New Markets Tax Credit program was expected to steer private financing into low-income communities to help create jobs. Yet, virtually every neighborhood, from Beverly Hills to the Hamptons, could qualify for the program, Coburn noted.

“As a result of the definition of qualified low-income communities, virtually all of the country’s census tracts [neighborhoods and communities] are potentially eligible for the NMTC,” according to a report from the nonpartisan Congressional Research Service.

While some of the projects are well intended, such as health clinics, Coburn acknowledged, it is difficult to measure if the tax credits are helping those who are seeking a hand up or simply subsidizing banks, corporations and others companies that are already succeeding.

The tax credit is intended to benefit the poor but is instead benefiting big banks and other private investors that claim more than $1 billion in NMTC annually. These include JP Morgan Chase, Bank of America, Goldman Sachs and Wells Fargo, among others.

The program duplicates over 100 other federal economic development efforts. There are at least 23 community development tax expenditures costing taxpayers over $10 billion annually and 80 overlapping discretionary programs costing $6.5 billion annually, 28 of which are specifically designed to spur growth in new markets.  Because of this redundancy, many projects and corporations are double-dipping on taxpayers—receiving multiple federal subsidies through other grant programs and tax giveaways. In addition, it is unclear which of these best meets the overlapping goals, or if any of them spur more economic growth than policies encouraging private investments that do not spend taxpayer money.

A separate Government Accountability Office report that was issued Monday was also critical of the New Markets Tax Credit program, revealing that fees charged by Community Development Entities reduced the amount of assistance provided to low-income community projects by $619 million (7.1 percent) from 2011 to 2012. A majority of NMTC-financed projects used more than one source of public funding, even though the purpose of the tax credit is to leverage private investment.

The GAO found that 62 percent of NMTC projects received other public funding from 2010 to 2010. One-third of NMTC projects received other federal funding, while 21 percent of NMTC projects received funding from multiple other government programs. In many cases, investors were able to claim the tax credit on the equity provided by the other public sources.

The NMTC has subsidized wealthy investors in nearly 4,000 projects, including car washes, bowling allies, parking lots and breweries, according to Coburn’s report. Many of these are not a federal priority—such as an ice skating rink and a car museum—while others help corporations with little need of taxpayer handouts, including food and beverage chains such as Subway, IHOP and Starbucks.

One of the program’s projects is threatening to bankrupt the city of Desert Hot Springs, Calif., where the cost to maintain the wellness center established with NMTC support has prompted across-the-board salary cuts and city officials are even considering elimination of the police department. Tens of thousands of dollars intended for the financially challenged clinic were spent to create a sculpture in the desert.

In another project in an area of Atlanta where condominiums sell for millions of dollars, NMTCs are being used to expand the world’s largest aquarium, according to Coburn’s report. “With ticket prices costing nearly $65 for a 15 minute show, the real beneficiaries are SunTrust Bank, Wells Fargo and the Emmy-award winning producers and Hollywood ensemble hired to develop the show, and of course the dolphins who live in the larger aquarium

[kcjenkins]

Did not realize you'd posted this, or I would not have also posted this.  Maybe a slightly more descriptive title?