A Clinton-era tax credit program intended to help grow businesses in low-income communities is instead benefitting big banks and private investors to the tune of more than $1 billion annually.
Sen. Tom Coburn, R-Okla., a top conservative fiscal watchdog, released a report Monday that is highly critical of the New Markets Tax Credit program, which was signed into law in 2000 by President Bill Clinton after a Republican-led House and Senate approved it.
According to Coburn, Wall Street banks and other big financial institutions have found ways to tap tens of millions of dollars in tax savings from the NMTC program even though the projects they invest in may not meet the intent of the law and often fail to bring the desired private investment business growth and job creation to low-income communities.
“The New Markets Tax Credit is 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,” Coburn said in a statement. “When government picks winners and losers, the losers usually end up being taxpayers.”
Coburn also pointed to “questionable” projects funded by the NMTC including:
• $3 million in tax credits assistance for the construction of a health center in Hawaiian Island of Lanai, a prosperous resort community mostly owned by billionaire Larry Ellison.
• $40 million in tax credits to expand the AT&T Dolphin Tales exhibit at the Atlanta Aquarium in Georgia. Coburn questioned the jobs created by the program, saying the exhibit used dozens of Hollywood performers, producers and directors “along with a team of talented individuals form TV, film and Broadway to develop the show.”
Aquarium officials acknowledged they could have raised the money without federal help, but used the tax program so they could save money for other enhancements at the park.
The show costs about $65 to see, which Coburn said is hardly in the price range of low income residents of Atlanta.
• $65,000 to fund a “Dancing on the Wind” sculpture in the California desert. The funds were left over from a New Markets Tax Credit used to help build the Wellness Center in Desert Hot Springs. The center is nearing bankruptcy and threatening the financial stability of the city.
• $13.5 million for a skating rink near Nationals baseball stadium in Washington, D.C.
• $13.3 million for an antique car museum in Tacoma, Wash. The tax credit was earned by U.S. Bancorp, which invested $34 million in cash and loans using loopholes in the law to qualify. The vintage cars are owned by the wealthy LeMay family.
• $4 million for the National Football League Youth Education Town legacy center in Indianapolis. Even though there was abundant private investment in the project, New Markets Tax Credits were used to build the center, which features basketball courts, locker rooms, a kitchen classroom and “NFL-quality practice field and track and greenhouse.” The tax credit was earned by JPMorgan Chase.
• $15 million in NMTC for an "old-fashioned style trolley system" in St. Louis. The project will cost $43 million overall, almost all of it funded by federal programs.
The list goes on, and is accompanied by a new report by the Government Accountability Office, which also found significant fault with the tax credit program. According to the GAO, nearly two-thirds of the projects funded by the program received other public funding, rather than private funding the program was supposed to attract.
The GAO found that investors were able to claim the tax credit based on equity provided by the public funding, too, thus increasing their tax savings.
“A majority of NMTC-financed projects utilize more than one source of public funding, despite the purpose of the tax credit being to leverage private investment,” the GAO report found.
Officials with the NMTC program, administered in part by the U.S. Treasury, did not return a request for comment, but according to the program website, the fund has awarded $40 billion in tax credits in 836 different awards to investors since its inception.