APA Statement on Tax Reform Legislation
Statement of the American Planning Association from APA President Cynthia Bowen, AICP, on the Tax Reform Legislation Under Congressional Consideration
U.S. Capitol Building, Washington, D.C.
The American Planning Association (APA) calls on Congress to preserve vital and proven tools in the tax code that spur economic growth by supporting critical investments in local neighborhoods and communities. APA opposes provisions of the current tax reform legislation that unnecessarily constrain the ability of planners, local governments and private sector partners to invest in infrastructure, housing, and economic development.
Far from unleashing new economic growth as tax reform promises, the current legislation would undermine efforts at the local level to support the economy by making a variety of infrastructure and development projects more expensive and difficult to build or finance. Strong infrastructure, housing, and redevelopment projects create the foundation for broad and inclusive economic growth.
APA opposes provisions in HR 1 that undermine critical bond and tax credit financing tools. Specifically, we urge Congress to maintain Private Activity Bonds (PABs) and the ability to advance refund municipal bonds and continue the Historic Tax Credit (HTCs), Rehabilitation Tax Credit, and the New Markets Tax Credit (NMTCs).
Recent studies have shown that far from being subsidies, these tools generate more growth and revenue than they cost and are catalysts for economic growth, private sector development and, most importantly vibrant and healthy neighborhoods.
PABs are widely used for infrastructure projects with a distinct public purpose such as airport and seaport projects, affordable housing, nonprofit health and education facilities, all of which contribute to vibrant local communities. In 2016, over $72 billion in PABs used largely by nonprofit hospitals and universities were issued, and in the same year over $12 billion was issued to support airports, housing, and rural public cooperatives. PABs also play a critical and required role in Low Income Housing Tax Credits. By eliminating PABs, the federal government limits flexibility for states and local governments to use their best combination of public financing methods available to deliver vital projects that provide essential public services.
The ability to advance refund outstanding bonds provides substantial savings to taxpayers. Under current law, government and 501(c)(3) bonds are permitted one opportunity to refinance at lower rates outside the 90-day period before the bonds come due. This allows public issuers to take advantage of fluctuations in interest rates to realize considerable savings on debt service, which ultimately benefits taxpayers. In 2016, the advance refunding of more than $120 billion of municipal securities saved taxpayers at least $3 billion.
The Historic Tax Credit supports the rehabilitation and reuse of historic properties that in turn spur the broad economic benefits of redevelopment and revitalization. HTCs are one of the most important and effective tools for historic preservation. Recognizing the cost associated with rehabilitating historic buildings, the HTC provides a 20 percent income tax credit to developers of income-producing properties such as office buildings, retail establishments, rental apartments, and others.
The tax credit has resulted in the preservation of more than 42,000 buildings and generated over $84 billion in economic development. In 2016 alone, 1,299 completed projects generated $7.16 billion in rehabilitation work and created 108,528 jobs.
The New Markets Tax Credit has been a central component of advancing economic development and access to opportunity in distressed rural and urban communities. It allows vital and valuable projects to gain financing that otherwise would either require greater public subsidies or not be built at all. The program has leveraged over $80 billion in public-private investments and created more than 750,000 jobs in some of the nation's poorest neighborhoods and towns. By financing more than 5,000 businesses and facilities since 2000, NMTC has accelerated private sector job and economic growth.
A key premise of comprehensive tax reform is that simplifying the tax code will generate new private investment that leads to greater economic growth. Undermining bonds and critical community development finance tools will not make it simpler to build infrastructure, housing, and commercial projects. On the contrary, it will make it more expensive and constrain economic growth and expanded opportunities in the nation's cities, towns, and communities.
APA stands ready to work with the Congress on an approach to tax reform that continues to expand local economies, strengthen communities, and increase opportunities for all.