By Bob Rapoza
In Doug Guthrie’s recent Forbes column on the LITHTC, For the 21st Century, a Network of Beneficial Philanthropy and Corporate Citizenship he mentions in passing that the New Markets Tax Credit (NMTC) has “failed to stimulate growth in the areas [it] have targeted.” Those conclusions are at odds with the facts.
Since 2003, New Markets has attracted over $30 billion in private investment in low-income businesses and created over 300,000 jobs nationwide. In 2010 alone, NMTC financing created some 70,000 jobs in some of the most economically distressed communities in the country. We would hardly call that a failure. The credit leverages $12 in private sector funding for every dollar in lost federal tax revenue (a great deal for taxpayers) and it was named one of the top 25 government programs by Harvard’s Kennedy School. If permanently authorized (like the LIHTC), there is no telling what this credit could accomplish.
The Credit was created to address a persistent problem in distressed areas: while there are many attractive business opportunities, the cost and scarcity of capital in these ‘New Markets’ is a substantial impediment to spurring economic growth. The NMTC helps to ease the flow of private sector investments into these communities. These investments often serve as the lynchpin for neighborhood revitalization and they would not be possible without the Credit. In fact, a 2010 GAO report found that 90% of NMTC projects were dependent on NMTC financing and would not have happened otherwise.
Guthrie was right to laud the LIHTC, which creates a cross-sector ecosystem of community stakeholders, but the same can be said of New Markets. The NMTC built upon and strengthened a delivery system of private for-profit and non-profit intermediaries that provide technical and financial assistance to economically distressed urban and rural communities. NMTC deals usually involve a diverse set of stakeholders, including historic preservationists, financial institutions, nonprofits, CDCs, CDFIs, local elected officials, small businesses, and large manufacturers.