GOP Lawmaker: Big Banks,
Corporations Reap Millions Abusing Tax Credit Designed For Needy Communities August 12, 2014 by Sam Rolley
Senator Tom Coburn (R-Okla.) released a report this week
detailing how corporate interests and big banks are abusing a tax incentive
designed to empower poor Americans.
During the Bill Clinton
Administration, Republican lawmakers created the New Markets Tax Credit to
provide incentive for banks to finance projects that would create new markets
in financially struggling communities.
But Coburn’s latest
waste-illuminating report, “Banking on the Poor,” finds that the program is
being used by big banks like Goldman Sachs, Wells Fargo and SunTrust, Hollywood
and a number of corporations.
“This tax credit intended to benefit
the poor is instead lining the pockets of the well-off, such as big banks and
other private investors that claim more than $1 billion in NMTC annually,”
Coburn said. “Because it is funded by taxing the labor of Americans, NMTC is
essentially a reverse Robin Hood scheme paid for with the taxes collected from
working Americans to provide pay outs to big banks and corporations in the hope
that those it took the money from might benefit.”
NMTC works through a complicated
process—but the crux of the scheme is incentivizing private investment in
projects that will increase employment or provide beneficial services to the
public by offering lavish tax subsidies to investors.
According to Coburn, 40 percent of
the current investments are made by banks. The report outlines how those
financial institutions are cashing in on tax credits equaling 39 percent of
NMTC investment for 7 years after scheming to maximize profits at taxpayer
expense.
Many banks have set up their own
CDEs in order to receive tax credit allocations from the Treasury, making them
both the recipient of the tax credits and the lender. Many of the top CDEs
receiving tax credit allocations are subsidiaries of major banks including Bank
of America, JP Morgan Chase, Wachovia (now Wells Fargo), and SunTrust banks
(see Appendix I). From 2003 to 2013, Bank of America’s CDE was awarded $696
million in tax credit allocation authority, while $450 million went to Chase
Bank, $488 million to Wachovia, and $428 million to Sun Trust. In the latest
round of NMTC allocations alone, Chase announced it was awarded a $60 million
allocation and Sun Trust was awarded a $43 million allocation.
Along with setting up their own
CDE’s, banks invest in other CDE’s, which provide them with tax credits in
return for an investment. Investors in the National Development Council, a CDE
that has received $486 million in tax credit allocation authority include
Citibank, Citizens Bank, Deutsche Bank, Dudley Ventures, JPMorgan Chase, Key
Bank, PNC Bank, Sun Trust, Wells Fargo, and U.S. Bank Enterprise Community
Partners, another CDE, has worked with U.S. Bank, Bank of America, JP Morgan
Chase, and others on over 55 developments.
“While Washington politicians tout
the program’s goal is to put more money into the hands of businesses in struggling
communities, the real beneficiaries are Wall Street banks, the CDE’s, and other
large investment enterprises,” Coburn said.
The lawmaker also outlined how NMTC
funds are often used on frivolous projects in areas from Beverly Hills to the
Hamptons, where the taxpayer-funded economic boost isn’t even needed. Coburn
cites the Congressional Research Service in noting that the definition of
qualified low-income communities qualifies “virtually all of the country’s
census tracts [neighborhoods and communities]” to NMTC eligibility.
The abuses of the NMTC funds listed
in the budget hawk’s report include:
A financially-failing health center
in Desert Hot Springs, California, complete with a $65,000 NMTC funded outdoor
sculpture
A $13.5 million contribution leveraged
using NMTCs for lighted water fountains in the Nation’s Capital
The city of St. Louis offered $10
million in financing through federal New Markets Tax Credits to a Fortune 500
company, Peabody Energy Corporation, to keep their business where it is, rather
than move 10 miles outside of downtown St. Louis
$40 million in tax credits to help
SunTrust and Wells Fargo invest in a dolphin show at the Atlanta aquarium.
Coburn said that, in addition to
underwhelming success at fulfilling its intended purpose, the NMTC duplicates
other wasteful government programs at a cost of $6.5 billion to taxpayers each
year— the report even provides examples of NMTC funding being used along with
money from programs it duplicates.
“When government picks winners and
losers, the losers usually end up being taxpayers,” Coburn said. “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.”
Source: http://personalliberty.com/gop-lawmaker-big-banks-corporations-reap-millions-abusing-tax-credit-designed-needy-communities/ Filed Under: Conservative
Politics, Liberty News, Staff Reports
Comments
Investment must be made in response to real
demand and the belief that whatever business the investment makes possible has
a good chance of being a profitable long term business. Too many tax subsidized developments fail
because the real economy does not support them.
Businesses in poor communities need to keep
their costs down to reflect their customers’ ability to pay. Expensive
infrastructure requires higher rents than businesses and residents can
afford. Poor communities are better off
“boot-strapping” their growth closely to real economic realities. These expensive developments result in
businesses and residents leaving the area.
They have been priced out of existence using their own tax money. That’s government corruption. Our property laws should allow buyers and
sellers to trade real estate for “fair value” void of outside interference like
subsidies. Recent government intrusion
into real estate development corrupts the process and violates property rights. Current businesses and residents are left
unprotected.
In our current situation, new malls are
subsidized and built to steal tenants from existing malls that then
deteriorate. Cities need to find ways to save these malls by keeping an eye out
for new tenants. Cities can legitimately
support this with improved streets and sidewalks. The investors should pay all the other
refurbishment costs without tax subsidies for anybody. It’s the free market
system, the only system that works.
Property companies need to do a better job of
keeping these commercial properties maintained. Homeowners typically replace
broken items as they occur including leaking roofs and worn-out HVAC units as
needed and renovate or update something in their homes every 20 years. Commercial property owners would do well to
do the same. We would all save money if we learn to build our residential and
commercial areas to last at least 100 years and get tax dollars out of the equation.
Norb Leahy, Dunwoody GA Tea Party Leader
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