Sen. Marco Rubio’s 11th-hour demand for a bigger child tax credit, along with other last-minute changes, makes clear that the U.S. tax bill is still far from a done deal. Given how razor-close the final vote will be, a single senator may have the power to force changes.
So as the bill comes out of the congressional conference committee, it’s not too late to highlight elements of the bill that can be fixed. One such vital tweak would protect funding mechanisms that have financed affordable housing and economic development, especially in low-income communities. The Kresge Foundation’s Kimberlee Cornett, in a three-minute video, breaks down four areas in which the House or Senate versions of the tax bill would do real damage.
For example, the reduction in the corporate tax rate would slash such companies’ appetite for Low-Income Tax Credit, as well as the equity they could raise. The tax credit has supported the development of thousands of units of low-income housing. Another provision would eliminate private-activity bonds, tax-exempt bonds issued by local or state governments, which have also financed affordable housing. “The short answer is, fewer people will have access to low-income housing,” Cornett says.
Even more alarming, the House version (though not the Senate version) of the tax bill would eliminate the New Markets Tax Credit, which has been used to finance economic redevelopment efforts and is a major source of revenues for community development finance institutions. In 2015, Congress extended the program through 2019, with the intent of catalyzing $18.5 billion in impact investing opportunities that benefit distressed communities with quality jobs, quality healthcare and education, access to healthy food and other outcomes.
“I believe that trickle-down effect will be a significant loss of revenue at the federal level, and that shortfall will trickle down to states and localities that will not have additional resources to make up the shortfall,” says Cornett, managing director of Kresge’s Social Investment Practice.
In addition to affordable housing, low-income communities need investments in job training, health care, community colleges and small-business development to build resilience in the face of a highly uncertain future, she says. “We’re not going to make those investments today because of this tax bill, and we’re going to pay for it in the future.”
Other impact investors are speaking up about the tax bill as well. Dave Kirkpatrick, managing director of SJF Ventures, wrote on LinkedIn that the Republican tax plan “likely will drive higher deficits, more poverty and inequity and more pollution.”
Kirkpatrick has some ideas for a better plan: “I would institute a carbon tax on pollution and then cut income and employment taxes for the poorest 50% of Americans. I would remove the tax subsidies for fossil fuels, allowing solar, wind, efficiency, electric vehicles and energy storage to continue their march towards a lower-cost and more resilient grid. I would invest in infrastructure for climate resiliency, transit and broadband. I would direct incentives to businesses to train and employ more workers at higher productivity, instead of tax incentives for lay-offs via never-ending automation and off-shoring.”