“Government should encourage mortgage lenders to make risky loans to an ‘underserved’ population; loans that wouldn’t otherwise be made without political pressure or incentives.”
Does that sound like federal policies of the last decade that in large part gave rise to the housing bubble, the bursting of which prompted our economy to spiral into the “Great Recession”?
Of course it does.
The bill is modeled after federal legislation of a similar name, and its goal is to encourage business lending into poor communities. In short, the legislation would create a tax credit for investments in businesses located in areas deemed “low income.” The credits can be awarded either to a company making the investment themselves, or a lending institution loaning to such a business.
In other words, the New Market Jobs Act is designed to encourage investments that would be too risky without the granting of political privilege in the form of a tax credit. The goal, of course, is to encourage more investment in low-income areas, just as federal policies in the last decade encouraged mortgage lending to low-income areas. And we all know how that turned out.
Why do politicians continue to try to tinker and micro-manage the economy? Why can’t they simply establish an economic climate where all businesses play by the same rules and all enjoy low tax rates and minimal, sensible regulation?
If businesses can’t survive without government privileges like targeted tax credits, it is best they go out of business so their resources can be freed up for other uses. Propping up unsuccessful businesses by government privilege encourages economic stagnation and ties up scarce resources that could instead be used by more innovative and efficient firms.
Several other states have also implemented their own “new market” tax credit schemes. Illinois experienced the completely predictable consequence of such a policy, as a Chicago-area company receiving nearly $8 million in state tax credits went bankrupt four months later. Indeed, testimony by an Oregon “tax fairness” advocacy group last year revealed that of the ten states that have implemented such a tax credit scheme, three have already stopped funding them.
North Carolina’s economy is struggling more than most states’ during this economic downturn, with an unemployment rate fourth highest in the nation. Granting targeted tax credits to risky business investments is not only inherently unfair, but is a recipe for continued economic stagnation. Because it hands out government privileges to certain businesses at the exclusion of others, and would further undermine North Carolina’s hopes of economic recovery, HB 1149 is this week’s Bad Bill of the Week.