Wages won’t bridge yawning racial wealth gaps or reverse income inequality.
Ownership might.
“The way people can really have a stable economic base is through ownership,” says Alison Lingane, founder of the new nonprofit Ownership Capital Lab. The lab’s “Ownership Economy Policy Brief” details practical reforms to the Community Reinvestment Act, the Small Business Administration, Opportunity Zones and New Markets Tax Credits and proposes some novel solutions as well.
Lingane hopes that uniting the planks under the umbrella of financing for the Ownership Economy can position the agenda as a bipartisan win. Ownership – helping workers get stakes in the companies that employ them, residents get equity in the homes they live in, and more low-income people build their balance sheets with retirement accounts – ducks hot-button issues by emphasizing “predistribution” rather than redistribution.
The policy brief reflects contributions from a half-dozen Ashoka Fellows, including Parity Homes Bree Jones (see, “Parity buys back the block to drive community revival without displacement”) and and Coalfield Development’s Brandon Dennison (see, “Forging a path for Appalachia’s green economy”) and Lingane herself. Among the recommendations:
Employee ownership. Investments in Opportunity Zones, which defer and reduce capital gains taxes, have heavily tilted to real estate deals over small business financing. Improvements under a bill introduced last year could go further and incentivize equity investments in family- and employee-owned small businesses and financing for transitions to broadbased employee ownership. Another proposal would make low-cost matching capital from the Small Business Administration available to Employee Equity Investment Companies, or EEICs, building on the SBA’s program for Small Business Investment Companies, or SBICs (see, “Multiplying transitions to employee ownership). Lingane is particularly passionate about dropping the personal guarantee requirement for loan guarantees under the SBA’s 7a program. Last year, the personal guarantee requirement was modified for Employee Stock Ownership Plans but not for worker coops or employee ownership trusts.
Tax credits. A “Neighborhood Homes Tax Credit” could incentivize the rehabilitation of housing in distressed neighborhoods. The existing Low Income Housing Tax Credit, or LIHTC, which helps finance low-income, multi-family rental housing, doesn’t cover buildings of four units or smaller, including single-family homes. Likewise, an expansion of the New Markets Tax Credit could make more financing available to small businesses in distressed neighborhoods (see, “A Community Investment Tool Both Parties Can Love”). And expanding the Community Reinvestment Act to cover non-bank financial institutions such as credit unions, mortgage companies and insurers that now represent 75% of financial assets, could dramatically expand lending in low-income communities, according to a 2020 paper from Sorenson Impact Center.
Donor advised funds. DAFs have grown to become a big business, with more than $230 billion in more than two million accounts. Though the tax benefits have been received, most of the money has not been dispersed to nonprofits. The fixes in the proposed “Accelerating Charitable Efforts Act” could go further and incentivize impact investments from the funds corpuses as well. Reducing the paperwork requirements for federal grants could also help organizations put more money to work in communities. “Streamlining administrative grant management may not be the sexiest issue, but it is an important and often overlooked aspect of how the Ownership Economy can expand,” the policy brief concludes.
