Financial Firms Steal Taxpayer Cash Meant for Poor Communities
A taxpayer-funded federal program designed to help America’s poor communities improve themselves has instead been abused by some of the country’s largest banks and financial firms to subsidize luxury hotels and even an antique car museum for a deceased garbage tycoon, Bloomberg Markets reports.
The program, called New Markets Tax Credits, is a Clinton-era creation meant to fund revitalization in poor communities by providing tax incentives to entities that invest in those communities. Investors receive a tax credit of 39% of the amount invested, paid out over seven years.
While the program has drawn much investment in desperately impoverished communities across the country, it has also been abused by firms using “creative financing” to receive tax credits for opulent projects far from the poor people that were meant to be the beneficiaries of the program.
Such is the case with the landmark Blackstone Hotel in one of the most prosperous areas of Chicago. A room in the Blackstone can run anywhere up to $700 a night, and the South Loop neighborhood is home to million dollar condos and some of the city’s premier cultural attractions. Still, Prudential Financial Inc., the second largest US life insurer, received $15.6 million in tax credits from the US government for helping to fund the Blackstone’s $116 million renovation. JP Morgan Chase & Co, the country’s second largest bank, also got a handsome credit from the project.
Obviously, this isn’t what the people who created New Markets Tax Credits envisioned when they came up with the program. “Things like luxury hotels are entirely contrary to what we set out to do,” Cliff Kellogg, who helped design the program when he was a senior policy adviser at the US Treasury Department, told Bloomberg Markets.
It isn’t just Prudential and JP Morgan Chase who have benefited by stealing taxpayer money meant for the poor. Goldman Sachs, US Bancorp and others have done so too, taking your tax dollars for building projects in census tracts with family incomes as high as $200,000.
In Tacoma, Washington, US Bancorp and other investors got New Markets financing to build a $34 million antique car museum to house the collection of a deceased garbage tycoon in an area with a poverty rate of just 1%. US Bancorp got $13.3 million in tax credits. “It’s a bunch of garbage,” Michael Engel, who manages a Veterans of Foreign Wars (VFW) hall half a dozen blocks from the proposed site of the Lemay- America’s Car Museum, told Bloomberg Markets.
A bunch of very expensive garbage.
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