    [House Hearing, 118 Congress]
    [From the U.S. Government Publishing Office]

                         FIELD HEARING ON CREATING MORE
                       OPPORTUNITY AND PROSPERITY IN THE
                                   RUST BELT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                              SUBCOMMITTEE ON TAX

                                     OF THE

                          COMMITTEE ON WAYS AND MEANS
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 20, 2024

                                   __________

                              Serial No. 118-TAX04

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                   __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    56-471                    WASHINGTON : 2024

    -----------------------------------------------------------------------------------

                          COMMITTEE ON WAYS AND MEANS

                        JASON SMITH, Missouri, Chairman
    VERN BUCHANAN, Florida               RICHARD E. NEAL, Massachusetts
    ADRIAN SMITH, Nebraska               LLOYD DOGGETT, Texas
    MIKE KELLY, Pennsylvania             MIKE THOMPSON, California
    DAVID SCHWEIKERT, Arizona            JOHN B. LARSON, Connecticut
    DARIN LaHOOD, Illinois               EARL BLUMENAUER, Oregon
    BRAD WENSTRUP, Ohio                  BILL PASCRELL, Jr., New Jersey
    JODEY ARRINGTON, Texas               DANNY DAVIS, Illinois
    DREW FERGUSON, Georgia               LINDA SANCHEZ, California
    RON ESTES, Kansas                    TERRI SEWELL, Alabama
    LLOYD SMUCKER, Pennsylvania          SUZAN DelBENE, Washington
    KEVIN HERN, Oklahoma                 JUDY CHU, California
    CAROL MILLER, West Virginia          GWEN MOORE, Wisconsin
    GREG MURPHY, North Carolina          DAN KILDEE, Michigan
    DAVID KUSTOFF, Tennessee             DON BEYER, Virginia
    BRIAN FITZPATRICK, Pennsylvania      DWIGHT EVANS, Pennsylvania
    GREG STEUBE, Florida                 BRAD SCHNEIDER, Illinois
    CLAUDIA TENNEY, New York             JIMMY PANETTA, California
    MICHELLE FISCHBACH, Minnesota        JIMMY GOMEZ, California
    BLAKE MOORE, Utah
    MICHELLE STEEL, California
    BETH VAN DUYNE, Texas
    RANDY FEENSTRA, Iowa
    NICOLE MALLIOTAKIS, New York
    MIKE CAREY, Ohio
                           Mark Roman, Staff Director
                     Brandon Casey, Minority Chief Counsel

                                 ------

                              SUBCOMMITTEE ON TAX

                       MIKE KELLY, Pennsylvania, Chairman
    DAVID SCHWEIKERT, Arizona            MIKE THOMPSON, California
    JODEY ARRINGTON, Texas               LLOYD DOGGETT, Texas
    DREW FERGUSON, Georgia               JOHN LARSON, Connecticut
    KEVIN HERN, Oklahoma                 LINDA SANCHEZ, California
    RON ESTES, Kansas                    SUZAN DelBENE, Washington
    LLOYD SMUCKER, Pennsylvania          GWEN MOORE, Wisconsin
    DAVID KUSTOFF, Tennessee             BRAD SCHNEIDER, Illinois
    BETH VAN DUYNE, Texas                JIMMY GOMEZ, California
    RANDY FEENSTRA, Iowa
    NICOLE MALLIOTAKIS, New York

                             C  O  N  T  E  N  T  S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Hon. Mike Kelly, Pennsylvania, Chairman..........................     1
    Hon. Gwen Moore, Wisconsin, Ranking Member.......................     3
    Advisory of May 20, 2024 announcing the hearing..................     V

                                   WITNESSES

    Drew Whiting, CEO, Erie Downtown Development Corporation.........     6
    Shafron ``Shay'' Hawkins, President and CEO, Opportunity
      Funds Association..............................................    15
    Jason Spore, Owner, Ippa Pizza Napoletana........................    20
    Tom Tredway, President, Erie Molded Packaging....................    24

                        MEMBER QUESTIONS FOR THE RECORD

    Member Questions for the Record and Responses from Drew Whiting,
      CEO, Erie Downtown Development Corporation.....................    50
    Member Questions for the Record and Responses from Shafron
      ``Shay''
      Hawkins, President and CEO, Opportunity Funds Association......    53

                        LOCAL SUBMISSIONS FOR THE RECORD

    Local Submissions................................................    55

                       PUBLIC SUBMISSIONS FOR THE RECORD

    Public Submissions...............................................    64

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

       CREATING MORE OPPORTUNITY AND PROSPERITY IN THE AMERICAN RUST BELT

                                  ----------

                              MONDAY, MAY 20, 2024

                      House of Representatives,
                                   Subcommittee on Tax,
                                   Committee on Ways and Means,
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 3:59 p.m., at
    Warner Theatre, 811 State Street, Erie, Pennsylvania, Hon.
    Michael Kelly [Chairman of the Subcommittee] presiding.
        Chairman KELLY. Welcome to the Ways and Means Subcommittee
    Field Hearing on Opportunity Zones, Tax Cuts and Jobs Act, and
    the Subcommittee will please come to order.
        Welcome to Erie, Pennsylvania. And I say this to my
    colleagues who are up here at the desk; I don't think they
    expected to see this type of a turnout. This is incredible. So
    I see Senator Laffa (?). We're used to this type of turnout
    anytime we get together, right? Brad. Everybody's here with us.
        So listen, our team is very excited to have you here today
    for the Field Hearing on the success story of Erie's
    Opportunity Zone and how this Committee can create
    opportunities for Erie--in areas such as Erie to thrive in the
    Rust Belt and throughout the country.
        Thank you, Chairman Smith, and your team, for all your hard
    work that you've done these last few months to bring this
    committee to western Pennsylvania. I also want to take a moment
    to thank all those in this community who have helped my team
    and I make this event such a success. Without your efforts,
    none of this could be done. You're all the epitome of what
    makes Erie thrive, and we are here today because of your
    dedication to protecting and revitalizing this community.
        For those of you unfamiliar with Erie, Erie residents are
    proud of their rich history. In the 1600s, the Eriez Indians
    first settled on the lake shore. The French later controlled
    the region, building a fort on Presque Isle, which they would
    later play a pivotal role in the War of 1812. Lake Erie served
    as a hub for the U.S. Navy's fleet. The Brigs Niagara and
    Lawrence helped secure victory in the 1813 Battle of Lake Erie.
    The reconstruction Oliver Hazard Perry's Flagship, the U.S.
    Brig Niagara sails in the Lake Erie off the Presque Isle Bay,
    is responsible for Erie's nickname, The Flagship City.
        Now, after the war and through the 1900s, Erie grew rapidly
    with busy rail lines and ports. Manufacturing jobs attracted
    waves of immigrants to the northwest corner of Pennsylvania.
    The population of Erie peaked in 1960 with 140,000 residents.
    Like many areas in the Rust Belt, Erie experienced a loss of
    good-paying manufacturing jobs and suffered perpetual
    population decline.
        Today, Erie's population sits at just around 90,000 people.
    The downtown zip code, 16501, became home to one of the poorest
    zip codes in the United States. But as I mentioned, Western
    Pennsylvanians are proud of our history and have deep pride in
    the area where we live, with many folks born and raised in
    these towns and choosing to raise the next generation right
    here in Erie, we have a vested interest in making our
    communities thrive like they did in our parents' and
    grandparents' generations.
        It was recently stated that Erie is a city with a can-do
    attitude, great work ethic and a true sense of community and
    family. Because of this, Erie community leaders came together
    to begin the revitalization efforts. With the help from key
    stakeholders and pivotal leaders of the community, the Erie
    Refocused plan took shape and the downtown--Erie Downtown
    Development Corporation began their work through property
    development in the summer of 2017. Major employers in Downtown
    Erie, including Mr. Tom Hagen with Erie Insurance, local
    universities and the city's top hospitals, partnered together
    to provide the initial funding to launch investment and
    development.
        Back in Washington, a bipartisan group of members, led by
    former representatives Pat Tiberi and Ron Kind, and Senators
    Tim Scott and Cory Booker, introduced the original Opportunity
    Zone legislation. This legislation, later added to the Tax Cuts
    and Jobs Act, had nearly 100 bipartisan sponsors, which is hard
    to do with the government we're in today. Opportunity Zones
    were designed to provide tax incentives that encourage long-
    term private capital investment to revitalize low-income areas.
        The Opportunity Zone program was able to facilitate the
    type of investments that would best serve the community's
    needs. With the new Opportunity Zone legislation and Tax Cuts
    and Jobs act, investors turn to Erie. After years of work and
    leadership of the Erie Downtown Development Corporation and
    local stakeholders, Erie has welcomed 110 new residential
    spaces, created space for 25 new businesses, restored eight
    historic properties, revitalized over 100,000 sqft. of
    commercial space and established a grocery store in what was
    previously designated a food desert.
        Erie Downtown Development Corporation stakeholders have
    leveraged $40 million in private capital into a $115 million
    investment throughout the downtown area Opportunity Zone, but
    our work on Opportunity Zones is not yet finished.
        Now, I'm proud to lead the Opportunity Zones Transparency,
    Extension and Improvement Act with my colleagues,
    Representatives Dan Kildee, Carol Miller and Terri Sewell. This
    legislation strengthens the Opportunity Zones with reporting
    requirements along with expanding incentives to help those
    communities that need it most. Last year, the Ways and Means
    Committee passed the Small Business Jobs Act, which included
    these reporting requirements, as well as new Rural Opportunity
    Zone program that will revitalize struggling communities in our
    heartlands; a way to ensure cities and towns, regardless of
    their population, can benefit from this legislation.
        I look forward to working with others on these bills and
    other Opportunity Zone legislation as we hand into 2025.
    Additionally, we have seen on this Main Street in Downtown Erie
    that success extends to the businesses beyond downtown.
    Manufacturing has been a large part of Erie's history and
    employs 25 percent of this community. These jobs, especially
    those in family-owned businesses, are the backbone of this
    community.
        This is why the Ways and Means Committee have been
    committed to extending and expanding pro-growth tax policy,
    like immediate expensing for R&D and 100 percent bonus
    depreciation, so we can give companies the tools they need to
    invest in their factories, their equipment, and most
    importantly, their workers. This will allow for Americans to
    remain more competitive in the global economic economy and keep
    folks on the job right here at home.
        Finally, I'm happy to have this panel of witnesses with us
    today to testify on the success of Opportunity Zones. The
    impact in this community, as well as other tax provisions that
    impact the manufacturing industry in the Erie Community.
        Before I turn this over, I think that that too often people
    have talked about Erie in the past tense. And for those of us
    that are familiar with Erie, know we would never, ever, ever
    give up on who we are, what we are and who made us what we are.
    Opportunity Zones became something that we never expected to
    have happen. Yet, Erie embraced it right from the beginning and
    has turned itself around.
        This is an incredible tribute to this community, the people
    who live here, the people who work here, and the people who
    came here to begin with--to start a family and to have a strong
    community.
        Now I'm privileged to have with me several of our Members.
    And now it is my honor to recognize the General Lady from
    Wisconsin, Ms. Moore, for her opening statement. Ms. Moore.
        Ms. MOORE of Wisconsin. Thank you so very much, Mr. Kelly.
    Thank you for inviting us to this beautiful community; another
    great place on the Great Lake. I hail from Milwaukee,
    Wisconsin, and Mr. Hawkins, I don't think Cleveland is a
    mistake on the Lake. I do think that while we talk about this
    being the Rust Belt region, we should just reimagine it as
    we're doing here today, and call it the Fresh Coast. I think
    we're going to see a lot of immigration to this area because
    these Great Lakes are a great, hidden secret, not only to the
    United States, but to this world.
        I have enjoyed my visit here in Erie. I want to thank Mr.
    Whiting for having lunch with us today. I was listening,
    although my ears are not as good, to try to catch some of the
    other just subtle sort of nuances. I know that you have great
    testimony here today. And of course, Mr. Hawkins, nice to see
    you again. You're the power behind the throne. And just really
    want to congratulate Senator Scott and my own Senator, retired
    Representative Ron Kind, for introducing this and pushing us to
    this point where we can look at how to renew it and how to
    improve it. It's really obvious that it's hard to track the
    impact of Opportunity Zones, given the lack of reporting
    requirements and transparency by investors.
        That holds true in Milwaukee, Wisconsin, but I'm aware of
    some of the important investments that have occurred in my own
    district. I just hope you can hold on and I can share that with
    you. For example, the Good City Brewing Company was one of the
    first companies in the region to use the federal Opportunity
    Zone program, which attracted investors to bring cash into a
    deal in the facility in the Century City Business Park.
        The Century City Business Park is a 44,000 square foot
    empty space and a building that was the headquarters of the old
    A.O. Smith factory, which at one time employed 30,000 people
    who lived in, what is now, the inner city of Milwaukee. And
    then there was Talgo's railcar refurbishing facility, the
    second tenant. That was good news.
        Now, the Central City Business Park was in a real tough
    part of the neighborhood. The entire area is in dire need of
    rehabilitation. So, it wasn't a surprise to me that Milwaukee
    had to use public funds to kind of bail out the businesses, but
    that was only temporary. We can boast that the Century City
    Building, located on the Northwest side is 100 percent leased
    and occupied. Just last month, the Craft Beverage Warehouse
    announced that it's looking to develop a new facility in the
    business firm.
        That said, I'm also aware of the opportunity projects
    funded that I wondered whether they're the best use for funds
    for the community, such as some of the condo projects that
    catered to higher incomes.
        So, that's just a taste of what we're seeing in Milwaukee.
    To the witnesses here today, thank you for coming. I look
    forward to hearing more of your testimony. Now, Mr. Chairman,
    as we explore the Opportunity Zone it's important to be clear
    eyed about what we're talking about here. The tax benefit
    conferred on taxpayers who invest in qualified opportunity
    funds are tax benefits for the rich. Now, in fact, the Joint
    Committee on Taxation found that the average income for
    qualified opportunity fund investors, nearly $1.1 million a
    year.
        Now, I know that you can start rolling your eyes,
    especially the Chairman of the full committee and say, here we
    go again, these liberal democrats, about going on about tax
    cuts for the rich, but I'm going to surprise you here today,
    Chairman. I get it, that so many parts of the country, Erie
    being one of them, Mr. Hawkins, need capital and private
    investment.
        I can understand why we might need a program to encourage
    that kind of private investment in areas where the return on
    capital might not otherwise be so great. And even though I know
    people are looking for capital, and look for people who need
    money, you're not going to hear me say these are tax cuts for
    the rich.
        I don't have unlimited time. I'm just a Ranking Member
    here, but I just need to make one last point, Mr. Chairman, and
    that is that I think that we just need to work further to make
    sure that there's a connection between enriching the richest
    investors and making sure that there's a real solid public
    purpose for this funding, because this is being funded by
    taxpayers.
        And so I just want to say before I go, I got pages to go,
    but like Drake would say, and I'm the Ranking Member here
    today, so I take certain privileges and, you know, I sit on
    that lower--in D.C., but I'm like Drake, I started from the
    bottom and now I'm here. And I yield back.
        Chairman KELLY. Thank you, Ms. Moore. That's a pretty good
    testimony--good opening remarks. I will say this though, if I
    may. Because I remember when we were doing Opportunity Zones
    and one of the complaints was, you were only concerned about
    the wealthy people. And my answer to that was, well, they have
    the money to invest using the core tax dollars to invest where
    nobody else would invest, because it didn't look like a
    promising thing.
        We encouraged people to invest in their communities, to
    make a change in a community that had been forgotten, that
    pushed aside, and nobody was going into. This, by the way, was
    able to bring those folks to say, you know what, I will take a
    chance. I will invest in their, using not taxpayer funded
    revenues, but using private dollars.
        So with that, the Chairman of the Ways and Means Committee,
    Mr. Smith.
        Chairman SMITH. Thank you, Chairman Kelly. Let me first
    begin by thanking you for hosting us here in your beautiful
    city, and also to the Warner Theatre for hosting us today.
    Beautiful, beautiful. And I want to thank each and every one of
    you for coming out. I believe it's extremely important to go
    outside of Washington and see real America and see how we can
    make policy that benefits rural America, but also see policies
    that does not benefit real America.
        I'm also sure I speak for all who participated, how
    gratifying and informative today's tour of the Erie Opportunity
    Zones was in helping paint a fuller picture of the true value
    of the program. The Ways and Means Committee is in Erie,
    Pennsylvania, because it is home to a true American success
    story that was born out of the hard work of the local community
    and common sense economic policies.
        Erie was once home to the poorest zip codes in the nation,
    but that changed in part because of the 2017 Trump tax cuts
    that not only lowered the tax burden on low-income families and
    raised wages, but also made critical investments in the
    strength and vitality of local communities through the
    Opportunity Zone program established under the law. Opportunity
    Zones have sparked a flood of private investment in communities
    most in need of an economic boost, and in Erie, over $750
    million has flowed to support the local community.
        Again, those are private sector dollars, not federal funds.
    The Ways and Means Committee is working to build on the success
    of the Trump tax cuts, and that includes the Opportunity Zones
    program. In June of last year, the Committee approved the Small
    Business Jobs Act, legislation to incentivize investment in
    America's Main Street businesses to make it easier for them to
    grow and create jobs, while also expanding the Opportunity Zone
    program to incorporate more rural communities.
        A key piece of that legislation was authored by our Tax
    Subcommittee Chairman Kelly, and includes important reporting
    requirements to ensure Opportunity Zones are being set up in
    accordance with the law and delivering on the promise of the
    policy.
        At the Ways and Means Committee, we have made substantial
    progress towards supporting Main Street businesses that are
    building stronger communities. There is more to be done, a lot
    more to be done. We are in Erie to hear your thoughts about the
    importance of these tax provisions because it's clear President
    Biden isn't listening. President Biden has pledged to let the
    Trump tax cuts expire.
        We know what that means for local economies like Erie.
    Starting in 2026, the average family of four in Erie, earning
    just shy of $60,000 will see their taxes go up by over $1,200
    per year upon expiration of those 2017 tax cuts. We know the
    small businesses that are the engine of growth in our
    Opportunity Zones will face a top rate, well over 40 percent.
    The families who earn the paychecks, raise their families and
    help keep the stores open on Main street will see their child
    tax credit and their guaranteed tax deduction slashed in half.
        We cannot allow for the success that has taken hold in Erie
    in communities all across our country to be rolled back or
    abandoned by letting the tax policies that have done so much
    for so many expire. Members of this Committee are already
    working with our tax teams to protect families and small
    businesses from losing the Trump tax cuts next year. One of
    those tax teams, chaired by Representative Kelly, is the
    Community Development team, which will focus on how we can
    encourage and incentivize more main street investments, expand
    housing opportunities and support small communities so they can
    grow and meet the needs of families where they live and work. I
    want to thank the witnesses for taking time out of your busy
    schedule for being here today, and I also want to make sure
    that we have the opportunity to hear from everyone in the
    audience as well. There will be clipboards that you will see
    that will be passed out for everyone to share with us your
    concerns and ideas.
        We will enter into the official hearing record and take
    those back with us to Washington. So please get a clipboard,
    write down your information, and it will be submitted into the
    official record. It is a pleasure to be in Erie, Pennsylvania.
    And it's a pleasure to be with you, Mr. Chairman.
        Chairman KELLY. Thank you, Chairman. Now I'm going to
    introduce our witnesses, Mr. Drew Whiting, who is the CEO of
    the Erie Downtown Development Corporation. Shay Hawkins is
    President and CEO of Opportunity Funds Association. Jason Spore
    is Founder and Owner of Ippa Pizza (Napoletana). Tom Tredway is
    President of Erie Molded Packaging. First of all, thank you all
    for taking time out of your lives here with us today, because
    it's important for the community to actually hear the people
    who are on the ground working in these programs and how it
    works for you. So thank you for doing that today.
        Now, your written statements will be made part of the
    hearing record and each of you will have five minutes to
    deliver your opening oral remarks.
        Mr. Whiting, you may begin, please.

       STATEMENT OF DREW WHITING, CEO, ERIE DOWNTOWN DEVELOPMENT
                              CORPORATION

        Mr. WHITING. Chairman, Ranking Members, it's a privilege to
    sit in front of you on behalf of the Erie Community and the
    Erie Downtown Development Corporation to thank you for
    providing a legislative catalyst that has changed the
    trajectory of our community for the better.
        The story of Erie over the last half century is familiar to
    anyone acquainted with the Greater Rust Belt region. A once-
    proud manufacturing center of the Great Lakes with a thriving
    middle class became a shell of itself over several decades.
    Community decline, often measured and communicated in terms
    population loss and other traditional economic metrics, is
    actually felt through the despair and the eventual apathy of
    its citizenry. A little less than a decade ago, Erie's private
    sector leadership, determined to reverse course, began
    designing a place to shock our city back to life.
        Opportunity Zone legislation passed as part of the Tax Cuts
    and Jobs Act, provided our stakeholders a major tool necessary
    to attract investment required to execute on that plan. Today,
    we celebrate Erie as one of the best examples of OZ-enabled
    transformation, the beneficiary of federal economic development
    catalyst that has served as a model for many other communities
    across the country.
        In December of 2021, after living in Chicago for more than
    14 years, my wife and I moved Erie to be closer to family. Hers
    in Erie, mine in Buffalo. We were working remotely, had no real
    plans to be involved in this community, but after landing in
    town, that notion very quickly changed. It was less than a week
    before we met new friends at the EDDC's Flagship City Food
    Hall, joined Radius, a longstanding pioneering co-working
    community and were introduced to members of our business
    community.
        From the bay front to the tracks, I noticed scaffolding,
    cranes, announcements of new investments and projects
    throughout the community. More importantly, I could feel it. I
    could feel the buzz, the energy that can only be described as a
    feeling of optimism and hope about the direction of this
    community. That feeling led us to immerse ourselves in the
    community. Before we were here for even a year, we purchased an
    anchor building on State Street with the intent of contributing
    to the factor--to the fabric of our new home in a positive way.
    That renovation has been done through an Opportunity Zone fund.
        Now, as the CEO of Erie Downtown Development Corporation
    and as a fully-converted believer in the potential of this
    city, I've joined the deep ranks of Erie evangelists who tout
    our quality of life, reasonable cost of living, amenity-rich
    downtown and resources that we possess on our Bayfront and with
    Presque Isle State Park and beyond.
        While it's difficult to measure community pride, I can tell
    you that despite the hits this community has taken, that pride
    is coming back. Look behind me. A major reason for that is the
    forward progress that you all saw today, and that was enabled
    by your Opportunity Zone legislation. Established in 2016 to
    revitalize Erie, the Erie Downtown Development Corporation,
    under the leadership of private and local stakeholders and
    John----
        Chairman KELLY. Excuse me, the chart's over there because I
    think it's important to see the return on that investment.
        Mr. WHITING. Oh, Yeah. Spent $27 and-a-half million of
    equity investment in the Erie Downtown Equity Fund, which was
    leveraged to invest in $113 million of development over the
    next seven years. Phase One, as it's termed, nearing completion
    later this month, has resulted in development progress and
    attraction of external investment in a fraction of the
    anticipated timeframe, primarily because of the catalytic
    impact of opportunities on legislation.
        The chart you see over here says volumes. It's also
    important to note that beyond that, we've attracted over $100
    million of other investment into this town from people that are
    not from Erie, that have no connection to this place. Ms.
    Moore, we are happy to report the above to you at any time, and
    under a more stringent reporting regime, we're happy to do it
    in even more detail.
        Ms. MOORE of Wisconsin. And maybe closer up, too.
        Mr. WHITING. Maybe closer up.
        In addition to that, other development money that's come to
    town, we've also seen companies like Truck-Lite, Kyocera come
    into town. National Fuel make downtown their continued
    headquarters. They've decided to remain or move operations to
    Erie based on the positive progress we're making downtown and
    the way that progress is radiating outside of that.
        Because of the progress we've made in Erie, I received
    frequent visitors and calls from thought leaders in the
    economic development realm. Though each has its own approach,
    most convey some version of hey, you've done a great job, but
    do not stop here. You need to do more.
        As you can see behind me, with a room full of Erieites
    (sic) showing up to let you all know that we appreciate the
    work that you've done for us, we also want to let you know we
    are committed to doing more. We do not view our work as an
    effort that will last a decade. We expect we will be working
    for a generation or more to fully reverse several decades of
    decline. Thus, it's crucial that OZ benefits and other tax
    policy and expansion tools are continued so that we can
    progress as a region.
        Our story is not finished. We have plenty of work to do. We
    remain steadfast in our commitment to our mission. We've never
    been more motivated than we are today. Community pride in Erie
    is surging. A community now richer with hope and optimism for
    the future. Thank you for working in a bipartisan fashion to
    enable our work over this past decade and for many years to
    come.
        [The statement of Mr. Whiting follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman KELLY. Okay.
        Thank you. I appreciate it, Mr. Whiting. Now, we recognize
    Mr. Hawkins. Mr. Hawkins, you are now recognized. I will tap
    the mic when it gets down to where you're at 30 seconds left to
    go. As I know you all have a lot to say.
        I hate to shut everybody off because it's your day and it's
    our purpose of being here, to listen to you, but Mr. Hawkins,
    you are recognized five minutes.

       STATEMENT OF SHAFRON ``SHAY'' HAWKINS, PRESIDENT AND CEO,
                     OPPORTUNITY FUNDS ASSOCIATION

        Mr. HAWKINS. Well, Chairman Kelly, Ranking Member Moore,
    Chairman Smith, thank you for having me today. This is my 7th
    time testifying before Congress, but my first time testifying
    before the Tax Subcommittee. So I really thank you and it's a
    special privilege for me to be testifying again in the
    heartland as I was born and currently reside just an hour and-
    a-half west of here in Cleveland, Ohio. And I appreciate your
    comment, Representative Moore, that Cleveland is not a mistake
    on the Lake. It's part of that freshwater kingdom you
    described, and so we are--I really appreciate you allowing me
    to be a part of this.
        So I am Co-Founder and President of the Opportunity Funds
    Association, a trade association whose members are
    entrepreneurs, investors, developers and fund managers
    operating in Opportunity Zones. Opportunity Zones are arguably
    the most successful community development policy in American
    history. So this afternoon, I would like to discuss how
    Opportunity Zones are targeting private investment in areas of
    the country that have been de industrialized, and how tax
    policy can be used to build domestic supply chains, incur free
    investment, and renew prosperity in places like Erie, but also
    in the often overlooked rural communities across this nation.
        And so, you know, prior to Cofounding OFA, I served as
    majority staff director the Senate Finance Subcommittee on
    Energy, Natural Resources and Infrastructure, and as tax
    counsel to Senator Tim Scott, where I helped champion the
    Investing and Opportunity Act, which became opportunity
    centers. Analysis from the Economic Innovation Group, using
    data from recent studies at UC Berkeley and our Treasury
    Department, found that by 2020, OZ had already achieved
    unprecedented geographic reach and scale.
        So just two and-a-half years after zone designation, nearly
    half--again, half, or roughly 3,800 communities across every
    state that receive investment, with those investments being
    among the highest-need communities in the U.S. And so how can
    Congress help to reinvigorate and bring prosperity to
    heartland?
        Well, first of all, we need to urge President Biden to
    abandon plans for any tax increases. Working families are
    already seeing tightening budgets and higher prices. Over the
    past few years, our consumer prices have risen 19 percent.
    Forty percent for electricity, 30 percent for gasoline, 46
    percent for car insurance, 51 percent and 30 percent--I'm
    sorry, 30 percent for baby food. And so adding to this, the Tax
    Foundation estimates that we would lose 788,000 full-time jobs
    and 2.2 percent of GDP if the President's fiscal year 2025
    budget were enacted in his proposed budget.
        And so, you know, first do no harm. In terms of Opportunity
    Zones, as Representative Moore indicated, it is critical, and
    perhaps the most important step that Congress can take to
    optimize sustainable growth and Opportunity Zones, we need to
    pass a bill adding reporting and transparency requirements,
    such as those found in the Small Business Jobs Act and those
    largely mirrored in Chairman Smith's opportunity Zone
    Transparency Expansion and Improvement Act. And so that is
    critical.
        We also need to jumpstart our rural investment by allowing
    for intermediary investments in what are called feeder funds,
    which will enable more investment from smaller, more qualified
    opportunity funds in a fund to funds model that will enable
    smaller, regionally focused, impact-oriented funds that are
    more likely to invest in rural areas and also solve the problem
    that Representative Moore noted, with only large investors
    being involved in the process.
        So we can solve that today. And lastly, we need to enact
    legislation, as my fellow witness noted, to extend this great
    policy. With that transparency reporting information will be
    able to better understand how Opportunity Zones are performing,
    and then you and Congress can tweak that to make this great
    policy even more effective. So I appreciate you having me
    today, and I look forward to hearing from my fellow witnesses
    and my discussion with you all.
        [The statement of Mr. Hawkins follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman KELLY. Thank you, Mr. Hawkins.
        Mr. Spore, you're now recognized for five minutes.

        STATEMENT OF JASON SPORE, FOUNDER AND OWNER, IPPA PIZZA
                               NAPOLETANA

        Mr. SPORE. I'd like to start today by thanking Subcommittee
    Chairman Kelly, Ranking Member Moore, Chairman Smith, and
    Members of the Ways and needs committee for allowing me the
    opportunity to comment today on the impact the Opportunity Zone
    in Erie, Pennsylvania. The policies that shape it and the
    investments made by organizations who invest have had on my
    business.
        Ippa Pizza Napoletana was established in 2022 as a food
    truck with the central commissary about a mile and-half down
    the road. I set off on this venture with the hopes and dreams
    of creating some of the best pizza in the region; the nation
    really. Like any business first starting out, I had big goals.
    I have a mission, vision, values. Those all serve as my
    guideposts. Ultimately, I wanted to build something that my
    family could be proud of and that the Erie community could be
    proud of. I have a goal of supporting the local economy with
    purchase of my raw goods. More important is to build a culture
    inside of my organization where individuals who maybe didn't
    get the best start in life would find a place to work that
    would teach self-worth, leadership and growth both personally
    and professionally.
        What started out as a dream in college when my mom actually
    laughed at me when I asked her to teach me how to make dough
    over the phone, turned into an obsession. So where did the name
    Ippa come from? It came from my son Colby when he was 18 months
    old and learning how to talk. That's what he said. That's the
    way that he said pizza. He'd reach for this guy and say, ippa,
    ippa, reaching for another slice. He's truly a boy after my own
    heart.
        So I learned to make authentic Neapolitan pizza from a
    world champion pizzaiolo, or pizza maker, who runs two of the
    most acclaimed pizza restaurants in New York City. I took these
    learnings and I built a product serving naturally-fermented
    dough made in part from locally sourced wheat from Pittsburgh.
    We source garlic and heirloom tomatoes and cheese curd from
    local and regional farmers and producers when in season. We
    compost our organic scraps with a local company and donate the
    fresh compost back to farmers who then again regrow our
    vegetables. All this is done not because it's easy or cheap,
    but because it results in a better product.
        We feel an immense sense of pride being one of the largest
    customers of each of these other small businesses and
    contributing to local supply chains. If we can be a part of
    another business's success story, it's a good thing, and JFK
    once said, a rising tide lifts all boats.
        Like any small business, we faced challenges early.
    Specifically, we needed more employees and marketing. As almost
    a 50-year old trying to learn the intricacies of today's social
    media, you'll find out real quick why marketing is a four-year
    degree. I was also working and continued to work full time, so
    time management and allocation of resources had to be more
    efficient. We learned limitations that existed in our current
    operation. We knew that if were to become viable, we needed to
    transition into a brick and mortar operation as soon as
    possible. In short, we needed help.
        Upon all these realizations, I simultaneously learned of a
    potential opening in the Flagship City Food Hall, right in the
    middle Erie, PA's Opportunity Zone. I began to understand what
    an Opportunity Zone was and how the investments made were truly
    a win, win, win for the businesses that invest in these
    depressed areas. The new business owners who touch the
    customers directly, like myself, and most important, the
    greater community that ultimately becomes a vibrant place to
    live, work and play.
        The companies who invest, like Erie Insurance, UPMC,
    Gannon, Mercyhurst, Plastek, the Erie Community Foundation, AHN
    and Highmark, the Hagen family and all the local banks; they
    get deferred tax benefits. They get breaks on capital gains,
    tax breaks on capital gains, but it's not about that. What do
    they give? They give the citizens of Erie a new beginning,
    options to work, play and shop. They give the opportunity to
    make the community in which they choose to operate, great. They
    provide revitalization and make people want to work and live
    here, raise their families, visit on a vacation. And they give
    the opportunity for people like me to live the American dream.
        Ippa Pizza Napoletana relocated to 22 North Park Row in
    January of 2024. Remember when I said we needed help? The
    professionalism and guidance by Drew Whiting, the President of
    the EDDC. Corey Cook in the back there, he's the Director of
    Operations. Mark Inscho, Director of Food and Beverage. Paula
    Gregory, the Controller, were invaluable and just what we
    needed through this transition. What about marketing? The help
    afforded by Ryan Hoover, the experienced director, was one of
    the biggest surprises. When Ryan's in the building, our
    business gets highlighted to the Greater Erie community, and we
    make money, which is the lifeblood of everything we're talking
    about today.
        What about access to motivated employees and other business
    owners? Because of the groundwork laid several years ago, a
    transplant to Erie like me was able to grow fast and I'm proud
    to say that we now employ 12 employees, where we ran for a year
    and-a-half with only three, and we're still hiring. At Ippa,
    our story is just getting started.
        So what happens if the tax provisions afforded investors in
    Opportunity Zones expire with no legislative action? I hope
    I've shown you what happens when this legislation is
    understood, appreciated and acted upon. Everyone in this room
    understands where we were in this community. 16501, one of the
    poorest zip codes in the United States.
        A mentor of mine, Uncle B. once said, don't just come to me
    with a problem, bring a solution. One of the poorest zip codes.
    That's our past. Walk across the street and see the progress.
    You've heard the goals and the dreams and you see the action.
    And I'm not the only one. We're living the solution. With your
    help, we are fixing it. It's a win, win, win. Let's not go
    backwards. Take action. We will make Erie great.
        Thank you for your time.
        [The statement of Mr. Spore follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman KELLY. Thank you, Mr. Spore.
        Mr. Tredway, you are now recognized.

       STATEMENT OF TOM TREDWAY, PRESIDENT, ERIE MOLDED PACKAGING

        Mr. TREDWAY. Good afternoon, Chairman Smith, Chairman
    Kelly, Ranking Member Moore, and members of the Committee. My
    name is Tom Tredway. I'm President of Erie Molded Packaging,
    privately held family-owned manufacturer, founded right here in
    Erie, Pennsylvania. I appreciate the opportunity to discuss
    critical tax provisions with you today and welcome you to the
    Keystone State.
        For more than 40 years, Erie Molded has been creating
    custom injection molding parts and integrated packaging
    solutions customers all over the country. My father, who was
    also an Erie native, had the desire to contribute to
    Pennsylvania's manufacturing sector. After running a successful
    string of businesses on the west coast in the seventies. He
    founded the company here in 1982 and has been a pillar of our
    community ever since.
        For those visiting our state who might not be familiar with
    Pennsylvania's iconic architecture, our state nickname is
    essential to who we are as people; a keystone is in the center
    of an arch that holds the other stones in place. It is the
    strongest and most critical part of the structure and once you
    know what--excuse me. And once you know what they are, you will
    surely recognize the symbol across the state. The stone
    reflects Pennsylvania's historic and political importance in
    America's early years. The U.S. tax code also functions as a
    keystone for our great nation.
        Manufacturers across the country face unique challenges
    every day. When our keystone is strong, such as having pro-
    growth tax code, we're able to build something great. However,
    beginning in 2022, our tax code began to develop cracks,
    weakening the entire structure. Tax provisions that had either
    been in the Code for decades or enacted as part of the 2017 tax
    reform, began expiring in 2022. And there are more damaging
    changes on the way next year. A weakened tax code, severe
    worker shortages, supply chain disruption, and competition from
    abroad have significantly impacted Pennsylvania's manufacturing
    community.
        I want to thank all the members on the subcommittee who
    supported the tax relief for American Families and Workers Act
    earlier this year, and I'm calling my Congress to finish the
    job by getting this bill signed into law. This legislation will
    allow provisions from the 2017 Tax Reform, such as domestic R&D
    expensing, interest deductibility standards, and full expensing
    provisions to be extended until 2025.
        However, Congress has a major tax battle ahead of next year
    when crucial tax policies are set to expire, directly impacting
    manufacturers here in Pennsylvania and across America. In the
    years following TCJA, Erie Molded was able to invest nearly $7
    million in new capital equipment purchasing thanks to full
    expensing. Along with this much needed equipment, we also were
    able to create new positions across our team and deliver high-
    quality products to our customers.
        Full expensing was already phasing out and is set to
    completely expire in 2027. This is devastating for our
    manufacturers and has caused us to delay our own equipment
    purchases. Another harmful change that went into effect is the
    requirement to amortize our R&D expenses rather than being able
    to deduct them in the year occurred. This is a massive change
    for us, as historically, 90 percent of our R&D expenses went to
    our engineering payroll. That means eliminating R&D doesn't
    just have innovation, it also has a direct impact on people's
    jobs here and here.
        Congress not allowing manufacturers to immediately expense
    R&D directly translate to fewer quality jobs in the
    manufacturing sector, while our foreign competitors are
    implementing vastly beneficial R&D benefits. This change also
    caught me and many other manufacturers in our community
    completely off guard.
        In 2023, a full year after the R&D change, I was presented
    with taxable income that was almost six figures higher than I
    had anticipated. Changes like this mean I have to spend more
    time with my accountants and lawyers, figure out the best way
    to prepare for our future instead of going to business.
        Finally, EMP is organized as a pass- through, meaning when
    20 percent pass-through deduction expires at the end of 2025
    and individual tax rates increase, our tax bill will be
    significantly higher. Many small manufacturers are organized as
    pass-throughs, so our sector will be disproportionately harmed
    by the expiration of this deduction, severely hampering our
    growth trajectory. Similarly, since many family-owned
    manufacturers consist largely of illiquid assets, we are
    disproportionately impacted by the estate tax changes also
    coming in 2025.
        I urge every member of this Committee to preserve those and
    other pro-growth provisions which allow manufacturers to
    function as the backbone of our economy and compete on a global
    scale. I once again want to thank members of this Subcommittee
    for inviting me here today. I hope your time in the great state
    leaves you with a lasting impression as you return to work in
    D.C., and you keep the Keystone in mind as you debate our tax
    code's future.
        [The statement of Mr. Tredway follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman KELLY. Mr. Tredway, thank you. Thank you all for
    your testimony.
        My first question is going to be from Mr. Whiting. And I
    think we brought the chart up. Ms. Moore, this is for you.
    Here. Now, the reason we brought this forward, if you can see
    what happened, the taxes paid when these properties were
    acquired, taxes paid $176,185. After Erie downtown Development
    Corporation investment, it was $2,278,400. So the end game to
    all of this is, you know what, I've been through this in my
    life. There's many--a couple times in my life I paid absolutely
    no taxes and people said, how did you get away with that? I
    said, we lost money that year. Taxes are based on profits. And
    I think sometimes we forget who it is. The old story, don't
    worry about the mule, just load the wagon. When you treat the
    mule the right way, the mule can pull the wagon a lot easier
    and a lot harder.
        So Mr. Whiting, if you would explain a little bit, you're
    working in an Erie Downtown Development Corporation's Mission--
    and I really miss Johnny Persinger for not being here today
    because I know it would--how important he was to that and how
    it's felt in Downtown Erie. Are there examples of the progress
    of every vitalization of downtown Erie felt in other parts of
    this community?
        Mr. WHITING. Yeah, I think--you know, we all Miss John
    Persinger here and I know he's--he's going to be watching this,
    wishing he was sitting here as well. When I said that our work
    isn't done, I meant our work is not done. The new buildings
    that you saw on State Street today, the first one opened two
    and-a-half years ago. That effort in the two and-a-half years
    since has led to--in the one-mile radius around it, over $100
    million more investment. If you look at the five and ten-mile
    radiuses from that, you're starting to see that work as well,
    with the announcement of Kyocera and Truck-Lite coming to town.
    A lot of the work in our neighborhoods starting to happen
    through the development of different CDC and other vehicles to
    get the neighborhoods ready for this kind of change.
        We are starting to see it radiate out, but it's not there
    yet. This is not a decade long situation effort. This is a
    multiple generation effort that we're going to have to
    undertake to truly do the work completely here. Ten years of an
    Opportunity Zone Act being in place is a great start, but we're
    barely at the quarter pole. Give us another 20 years and you'll
    see a county that has felt the impact of this in a much more
    thorough way than what we're seeing right now.
        Chairman KELLY. Thank you. Mr. Hawkins, You played a
    pivotal role in the Opportunity Zone legislation in your time
    being a member of the staff. Part of the Opportunity Zone
    legislation that was left out in the final package was
    transparency and reporting requirements. Opportunity Zones have
    already become one of the most successful provisions of the
    republican tax cuts. Can you speak to the importance of
    including these requirements and how it further boosts
    Opportunity Zone investment?
        Mr. HAWKINS. Thank you, Chairman Kelly. Transparency
    reporting requirements are absolutely critical. So what we know
    from a UC Berkeley study, a Treasury Department study and some
    private information brought together by accounting firm called
    Novogradac, that a hundred billion dollars at least in equity,
    has gone into opportunity zones thus far. From the Treasury
    study, we have a feel for what percentage of each state's
    opportunity zones got investments in.
        So for instance, Pennsylvania, being about 44 percent of
    the designated zones, saw some investment. And so we have some
    very broad understanding that the policy is being impactful in
    a positive way. But it's like looking through a window, a car
    window with mud on it and the transparency and reporting
    legislation would essentially be like a windshield wiper just
    pulling the mud off. And so, you know, the legislation that we
    appreciate, so deeply appreciate you introducing, would empower
    Treasury to compare the performance of Opportunity Zones
    against areas that could have been designated zones, but
    weren't, and also compare the performance, economic performance
    across a number of key metrics with the broader economy. And
    that will allow you all on this panel to tweak the policy, but
    with a clean window, if you will, you know, with a full
    understanding of what needs to happen to make the policy even
    more impactful.
        Chairman KELLY. Thank you. Could you speak maybe a little
    bit too on how the opportunity zone have an impact on rural
    communities?
        Mr. HAWKINS. Yes. So that's absolutely critical. You know,
    one of the things that we see, you know, right now, we have an
    entire Opportunity Zone map that gives us a feel, again, for
    how diffuse the investment has been. So certain states like
    Mississippi, 65 percent of their Opportunity Zones have seen
    investment. Places like Utah see significant investment.
    Montana, once again above 60 percent. We see other states where
    you're looking at below 40 percent.
        And so one key element to drive that would immediately
    drive capital into rural Opportunity Zones would be this Feeder
    funds or Fund of Funds addition to the policy. What it
    basically enables is it enables folks who don't know
    specifically where they want to invest or how to just put--to
    give that money to smaller impact-oriented funds that know
    exactly what they want to do. And in rural areas, you're more
    likely to see investment in operating businesses. In the dense
    urban areas, you're obviously more likely to see investment in
    real estate.
        And so favoring operating businesses through feeder funds,
    favoring smaller, impact oriented investors through feeder
    funds and a fund of funds concept would absolutely jumpstart
    rural investment.
        Chairman KELLY. Thank you. Jason, I wanted to ask you a
    little bit. So without the Opportunity Zones, what would the
    future of Ippa Pizza be like? And I've got to tell you, first
    of all, I think sometimes people misunderstand. You work full
    time as it is.
        Mr. SPORE. I do.
        Chairman KELLY. Yeah. So this wasn't something that you
    were looking at and say, hey, here's a chance for me to
    really--to get ahead. But you were still working at the same
    time and then developing. I'm interested in where you got the
    recipes. That's really good--that's good to be able to get
    that. In my hometown, none of the Italians would ever share any
    of their recipes with anybody else. That's just the way they
    are. The Irish, they give you anything they can give you. But
    if you can, if it hadn't been for opportunity zones----
        Mr. SPORE. You know, I couldn't tell you.
        Chairman KELLY [continuing]. Would you have been able to do
    this?
        Mr. SPORE. I'm a pretty resilient guy, okay? I fight hard,
    and I--sometimes I don't know when to give up. So I would hate
    to say no, but what I will tell you, that the speed of which,
    of what I've been able to do and how fast I've grown, okay. The
    Opportunity Zone, the EDDC, the help that they've given and
    created for me has been paramount. No way I could do it the way
    that I'm doing it now.
        Chairman KELLY. Well, I've got to tell you, so----
        Mr. SPORE. Not even close.
        Chairman KELLY. So what you're talking about never giving
    up,----
        Mr. SPORE. Yes, sir.
        Chairman KELLY [continuing]. That's not only true of you.
        That's true of this town and of this state and of this
    country. We never, ever give up. We refuse to lose. That's the
    key to it.
        Mr. SPORE. It's a great quality.
        Chairman KELLY. Thank you so much. Yeah.
        Mr. Tredway, can you speak a little bit on the impact that
    R&D has had on your manufacturing business in the community
    that you work with closely? And if R&D was not extended into
    2025, how would that impact business in the Erie area?
        Mr. TREDWAY. So we make proprietary products Erie Molded.
    Stock packaging. Not the most exciting thing in the world, but
    it does require a lot of R&D, and most of that R&D is actually
    tied up, as I said earlier, in wages. It's a lot of
    engineering, spending time trying to figure out how to make a
    product better, bring a new product to market.
        So, I mean, when that policy changed, and it'd been that
    way since, what, the mid-50s? It was one of the more
    frustrating tax policy changes I could remember since being a
    businessowner, because now I'm forced to take something I have
    to pay for right away out of pocket with cash, but expense it
    over five years. And so again, myself and a lot of my other my
    cohorts got a huge tax bill they weren't expecting.
        So I mean, I think it's one of the more--it's just a
    critical piece of legislation, especially compare--or tax code
    rather, when you compare how other countries, like, China, a
    lot of European companies treat R&D. We need to do everything
    we can to incentivize it because otherwise it's going to be
    more challenging for someone like me to make those investments.
        Chairman KELLY. Thank you. I think one of the things were
    going through Tax Cuts and Jobs Act, in the very beginning, we
    were looking at what we were doing to business around America
    and we were actually driving people out of our country because
    of our policies. The idea that we've turned that around and
    people are now saying, no, I'm going to stay in America, I'm
    going to continue to invest in America and I'm going to look to
    the future to make it a stronger America, and certainly in the
    world we live in today, if we don't understand the importance
    of that, we understand absolutely nothing.
        I want to thank you all for being here. It's really good to
    hear from you and we'll stay in touch. Right now I'm going to
    recognize my colleague from Wisconsin, Ms. Moore.
        Ms. MOORE of Wisconsin. Well, thank you so much, Mr.
    Chairman. As you all noticed, the clock has started moving now
    that I'm talking, so we're going to get through this pretty
    quickly. I just wanted to talk to you, Mr. Spore. You said that
    you learned at age 50 that marketing was extremely important.
    Why don't you bring us any samples of that pizza so that we
    could assess and evaluate the value of this investment and----
        Mr. SPORE. I will personally escort you after the hearing.
        Ms. MOORE of Wisconsin. I mean, you--you've just got to
    think. You really do.
        I just want to make a comment on some of the things that
    our Chairmen have said because I'm the only Democrat up here,
    in case you guys didn't guess. And one of the things that the
    Chairman of our Subcommittee often says, and I even heard Mr.
    Hawkins talk about how corporations don't pay any taxes, people
    pay taxes and it's passed on to consumers and so forth. And
    that the money that we call taxpayers money that we return in
    the way of tax cuts is not the government's money, it's their
    money.
        Well, listen, I just wanted to point out that when we, for
    example, cut corporate taxes to 21 percent from 35 percent,
    under that tax law, that was taxes that were owed to the public
    trough to pay for stuff like foreign aid to our ally Israel,
    for Defense, for veterans housing which is woefully inadequate,
    nursing homes for our seniors, roads and bridges.
        So yeah, it is money that is owed to all of us, and so when
    we have policies like the thing that we're discussing today,
    for example, we are deferring taxes that would have otherwise
    been paid for the public good and providing them as tax breaks.
    So, I do want people to know that, respect and appreciate that,
    it is a tax transfer.
        Now, when the Republicans here talk about how Democrats and
    Joe Biden are going to raise taxes on all these folks out here
    who are facing inflation and so forth in groceries, gasoline,
    and so forth, I do want you to know that the Tax Cuts and Jobs
    act was designed to provide those business cuts and make them
    permanent, like lowering the taxes from 35 percent to 21
    percent. They pay for them within the budget window. I can't do
    a whole class because the clock is moving, but they paid for
    them by making tax cuts to individuals temporary. So whatever
    tax cuts were made for low income or middle class people were
    temporary while business taxes were permanent.
        And Mr. Tredway, in terms of bonus appreciations, we all
    agree with that, pass-throughs, I want you to know that all
    small businesses are pass-throughs and they deserve the
    benefit, but all pass-throughs are not small businesses. So we
    need to look at that legislation. We're not talking about that
    today, because 80 percent of that money that benefits these
    small manufacturers like you goes to the big-old corporations.
        Now, that being said, I just want to thank everybody for
    being here and want to point out that I think that we have had
    very good testimony here of how we need to tighten this up
    because what we have seen, and that's not been the case here in
    Erie and not in Milwaukee, but I hear places that we all love
    like New York City or other places where we're scratching our
    heads, Mr. Chairman, and wondering was that the best investment
    of our tax monies that would ordinarily go into the trough to
    pay for toward our deficit or whatever and also up rural areas.
        Mr. Scott comes from South Carolina and so does Mr.
    Clyburn. They came up with the 10/20/30 formula and they both
    had their minds trained on making sure that those areas that
    were populated with poor people could benefit from it too. I
    don't have any problem with most of this money going to real
    estate, but maybe we ought to put some conditions around it
    where we at least have some mixed-use of it.
        If you're gonna' build gorgeous luxury apartments, maybe a
    third of them ought to be affordable housing and get that mix
    in, since it is taxpayer money that is providing this
    extraordinary capital gains treatment. As you notice, you see
    that clock there? That clock will not come on when he
    recognizes Mr. Smith here. So I yield back.
        Chairman KELLY. Well, that's the good thing about being in
    the Majority.
        Ms. MOORE of Wisconsin. That's it.
        Chairman KELLY. I know that it can be offensive at times,
    but I also would like to point out that while you may not agree
    that the Tax Cuts and Jobs Act was a great--great piece of
    legislation, the great--the most----
        Ms. MOORE of Wisconsin. I didn't say that.
        Chairman KELLY. Excuse me, excuse me, reclaiming my time.
        Ms. MOORE of Wisconsin. Oh, I'm sorry.
        Chairman KELLY. The most revenue we've ever been able to
    collect was during the TCJA. So as bad as it may be in some
    places--but I will tell you what, Ms. Moore, I would be glad to
    work with you and I would appreciate it--it would've been nice
    if some--some other folks from the democrat part of the--of the
    Committee would have been here today as just opposed to
    yourself. They were all invited. I guess they didn't find time
    and didn't see that going to Erie was going to be that big of a
    deal.
        But I got to tell you, when we stop talking about democrat
    versus republican, talk about Americans helping fellow
    Americans, I think we're much more successful in that. I try to
    stay away from that and I think that most of us, I think the--
    the country in general is so polarized. We need to get away
    from that. That is what is absolutely destroying this great,
    great country.
        So Mr. Chairman, you're recognized.
        Chairman SMITH. Thank you. With the magic minute I guess,
    that's--it's great to, it's great to be here to ask some
    questions.
        Mr. Whiting, you've had a front row seat to the way that
    the Opportunity Zone program has transformed this community in
    Erie. We can see the infrastructure. When we were driving
    through the streets, you could see that there weren't vacant
    buildings, they were full. I wish that was the case in my home
    State of Missouri. It's not. But what has this program meant
    for the working families of this community? And what about just
    what has this meant to this community?
        Mr. WHITING. So I touched on it in my remarks, but I think
    it has allowed us to take the first steps of forward progress
    this community has seen in five decades. And that forward
    progressive inspires others to follow along. It creates a sense
    of optimism, creates a regained sense of community pride. And
    one of the things that we're really focused on right now too,
    when we talk about working families and small businesses, is
    we're not operating a suburban mall food court downtown. Every
    business that comes into our footprint is locally owned and we
    are giving them priorities as they build out their businesses
    so that their families can live the proverbial American dream
    by growing something that's theirs and contributing to that
    economic multiplier effect that we're all striving for.
        The work that we need to do to ensure that those businesses
    have the tools that they need to be successful is the work
    that's going to make us all sustainable. That means we need to
    continue to have expanding tools in order to be able to do
    that. Whether that's tools for businesses that are under a
    certain size, being exempt from certain taxes, investors in
    those businesses, getting something back for their dollars in
    year one, many states are doing it. There's no reason I can't
    get down to the federal level, too. You guys have the tools.
    We're here to encourage you to use them.
        Chairman SMITH. Thank you. Mr. Hawkins, while Opportunity
    Zones have been an incredible success story for many
    communities, we now know that 95 percent of the Opportunity
    Zone investment has gone to urban areas. In the Small Business
    Jobs Act that passed out of the Ways and Means Committee last
    June, and we included provisions to establish a new rural
    Opportunity Zone program more targeted to rural America.
        Given your extensive experience with Senator Scott and
    working on this program, what more should we do to ensure its
    success for rural communities? You kind of touched on that
    earlier, but what--I want to make sure that we see these
    successes all over the country.
        Mr. HAWKINS. Well, the first critical step is built into
    that very Small Business Jobs Act, is that transparency in
    reporting. And so were glad to see that the transparency
    reporting requirements in the bill you just noted, mirrored
    those transparency reporting requirements in the Opportunity
    Zone. Transparency Reporting and Extension Act that Chairman
    Kelly led. That is critical because then again, be able to make
    reasonable adjustments to the policy, but with a full
    understanding, deep understanding of why areas are getting the
    investments they're getting and what should be done, what
    specific steps should be taken.
        So for instance, when you look at the data on affordable
    housing across the country, there's a clear trend that we see
    across the country; higher--you know, higher housing stock, but
    without an intended increase in rents. Right. But the
    transparency reporting requirements that you have in your Bill
    would allow us to drill down on that and see why.
        Some governors prioritized affordable housing. They
    prioritized some areas over others. They had certain--and
    certain outlook. You know, when you look at, say, a state like
    Colorado, where 7 percent of the zone saw investment, that was
    because of an intentionality on the part of local government
    that produced certain results that they wanted to produce. So
    the first key step is that transparency legislation. The next
    step is the step you've already both taken.
        The next step is that feeder funds concept that basically
    brings operating businesses to the front of the line. Operating
    businesses are what it would be to get that number from 5
    percent, you know, to 20 percent to 10 percent, which
    directionally, is what we want to do in these rural areas.
        Chairman SMITH. So the Opportunity Zone program has not
    operated in a vacuum. It was created as part of the Trump tax
    cuts, which provided critical tax relief to working families,
    as well as businesses that employ them, including research and
    development expensing that was mentioned, which supports 21
    million jobs, a hundred percent immediate expensing on
    equipment, interest deductibility, death tax relief, and the 20
    percent small business deduction of the 199-A.
        Mr. Tredway, can you share how these pro-growth tax
    policies worked in tandem with the Opportunity Zone program to
    benefit your family-owned small business and others like it?
        Mr. TREDWAY. The pro-growth tax strategies from the TCGA
    (sic) put us in a better position to thrive. We had good things
    going our way, but having incentives to do research and
    development, having incentives to make capital investments that
    we need as a small business to both domestically and
    internationally, all allowed us to put more money back into our
    employees, back to our company. Every employee at Erie Molded
    would tell you that the owners put everything back in.
        We're sending entry-level employees through education,
    through different classes, local colleges, and local other--
    educational institutions, so they can get training that will
    carry with them all the way for the rest of their lives, right?
    And we're able to do that in a way we never had before.
        So it allowed us to hire more people, bring more people to
    this region, and then if you take a look at the Opportunity
    Zones, it made it a better place for those people to live, work
    and play. I've been back in area for almost 20 years. I've
    never seen so much excitement, so much investment downtown. And
    that's a big benefit, because part of our business strategy is
    to retain and attract workers. So Opportunity Zones has had a
    huge impact in that regard.
        Chairman SMITH. Thank you. Thank you, Mr. Chairman.
        Chairman KELLY. Thank you, Chairman. We'll now recognize
    the gentleman from Arizona, Mr. Schweikert for five minutes.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman, and Mr. Chairman
    and Ranking Member Moore. We all get titles. I want to walk
    through a couple of things, and also, Mr. Kelly, I really
    appreciate it. I've never been in this part of the country. I'm
    from Arizona, and my world is very different than yours. My
    county has about 400 or 500 new residents every day. So when
    you read and look at some of this data here, it's, for me to
    get my head around what struggle really is like, but Mr.
    Hawkins, I want to walk through, and I don't mean to sound like
    a heretic, because I personally come from the real estate
    world, but if I was to sit down with you and say, okay, the
    next generation of Opportunity Zones, you want more of the
    benefits to incentivize the actual employment engine than maybe
    the--the real estate side? You know, we need many of these
    areas to have rehab, this and that, but one of my great
    concerns is, how do I get the next generation of
    entrepreneurship training, learning to show up at work, things
    like that, control of work, things like that, to actually also
    have investment. And sometimes investors who would be
    interested in that growing concern actually succeed? How would
    you design--in a short time, how would you design that type of
    feeder fund?
        Mr. HAWKINS. Sure. So you'll be familiar from the private
    equity world in real estate, private equity, the concept of a
    Fund to Funds. So where smaller fund managers, smaller
    investors are able to benefit from folks who are just coming in
    and----
        Mr. SCHWEIKERT. But--and somebody said it's two--two
    things. Over here I have my credit investment, you can--you
    could actually take some of our updated and credit investor
    rules and make it so smaller individuals could participate in
    receiving the tax benefits. And maybe even you could design
    there where you small equity interests, so you actually have a
    benefit if the concern does well. I'm just--I don't want to
    have a world where we've done amazing rehab in difficult areas
    or rural America, where you built--you fixed the building; I
    now need businesses in that.
        Mr. HAWKINS. Right.
        Mr. SCHWEIKERT. I need the next--you know, the folks who
    venture to bring in the next generation of talent.
        Mr. HAWKINS. Right. And the next really exciting--you know,
    exciting possibility is if Congress were to allow after tax
    dollars to come into Opportunity Zones or the benefit of the
    ten year--if you hold a--if you hold an investment for ten
    years, ten plus years, ten years and a day, then you get a 100
    percent step-up basis. So think of it as no capital gains on
    the new business that you started in an Opportunity Zone. So
    that'll be--that'll mirror what we see in traditional
    business----
        Mr. SCHWEIKERT. But----
        Mr. HAWKINS [continuing]. Operating business investment,
    which will create more jobs.
        Mr. SCHWEIKERT. Putting your model in your head, is it to
    the business or is it to the investors in the business?
        Mr. HAWKINS. I'm sorry?
        Mr. SCHWEIKERT. Is it to the business or the investors in
    the business?
        Mr. HAWKINS. So the gain improves--so if I start Hawkins,
    LLC, you know, and let's say it's a social media company, and
    so I invest a million dollars in capital gains into that
    business, obviously, I still owe my taxes on those capital
    gains, you know, after the deferral period ends, but there's an
    additional benefit that says Hawkins, LLC, that new business,
    if that business goes from a million dollars in value to $10
    million in value, and I hold that business for 20 years, or 11
    years, when I sell Hawkins, LLC to, you know, some larger
    company, there's no capital gains on the $9 million.
        Mr. SCHWEIKERT. Okay.
        We'll have to whiteboard this, because I'm not sure that
    completely gets my capital to run to the business, to finance
    it, to--so we'll walk through that.
        Mister--is it Tredwell?
        Mr. TREDWAY. Tredway.
        Mr. SCHWEIKERT. Tredway.
        Mr. TREDWAY. Tredway, yeah.
        Mr. SCHWEIKERT. Or I could just look at--read your
    nameplate. You actually said something--and this is one of my
    fixations for my brothers and sisters here on the Committee.
    The hundred percent expensing, which we believe may, at least
    in the text from single biggest driver of economic expansion is
    a timing effect. You still--you know, if--whether we make you
    depreciate something in seven years or five years or in one
    day, government still--you still get the same depreciation.
    It's a timing effect. The same thing on research and
    development. Perversity we have right now is you do research
    and development, you now have to finance it and then later on
    you get depreciated over the years. So now in today's financing
    costs. So I sort of wish intellectually we could all sort of
    separate that those types of expensing, it's a timing effect
    issue that creates a virtuous capital cycle so you get more
    productive so you can pay your workers some more.
        So you see, my personal fixation is, what is the next
    generation of jobs really look like? And with that, I yield
    back, Mr. Chairman.
        Chairman KELLY. Thank you, Mr. Schweikert. Now recognize a
    gentleman from Kansas, Mr. Estes, for five minutes.
        Mr. ESTES. Well, thank you, Mr. Chairman, and thank you to
    all of our witnesses for being here today. It's always great to
    get out of the D.C. Beltway and into diverse communities across
    our great nation to hear directly from Americans who are helped
    or harmed by the policies that we write or vote on.
        While today's hearing focuses on the success of good
    policy, namely Opportunity Zones that were implemented in the
    Republicans Tax Cuts and Jobs act in 2017, I want to take some
    time to highlight a few other areas ripe for strong policy
    action from this committee that can help communities in the
    Rust Belt and beyond.
        We know that nearly all Americans in every tax bracket saw
    tax relief thanks to the TCJA. The legislation's business
    provisions boosted the overall economy. However, many of these
    provisions have begun to expire, and the rest are set to do so
    in 2025. In fact, President Biden has made it clear that he
    will let these tax cuts expire, even though doing so means
    violating his pledge to not raise taxes on anyone making less
    than $400,000. This means that in my home district, hardworking
    Kansans can expect to pay $1,900 more in taxes in 2026.
        And right here in Erie, Pennsylvania, one estimate is that
    an average of over $1,700 will be paid in additional taxes,
    while Americans across the country will face similar or even
    greater tax increases. This would be on top of the historic
    levels of inflation that are currently crushing Americans and
    making it difficult to meet every day needs. According to the
    CBI data released last week, inflation is up 19.9 percent since
    President Biden took office in 2021.
        Mr. Spore, as a founder and new business owner and as a
    father, can you tell us how inflation is impacting you both
    personally and professionally? And how would additional tax
    hikes on office impact you and your company?
        Mr. SPORE. You know, just to--just to be brief. You know,
    any time I don't get to make the decisions with the capital
    that I'm earning, you know, I want to be able to make that
    decision. So it obviously--it gets harder, right? It gets
    harder. You already see that I work a lot of hours. I'm not
    afraid to work a lot of hours. Couldn't imagine adding more to
    that, so----
        Mr. ESTES. Yeah, and unfortunately, it's not just taxes
    that individuals will feel the paying if TCJA expires. Without
    action from the committee and Congress to extend and strengthen
    the business provisions in TCJA, businesses will be set back,
    hurting the economy, job creation and workers.
        We've already seen evidence of this through the expiration
    of the Immediate Research and Development Expensing Provision.
    Since amortization took effect, the growth rate of research and
    development has slowed dramatically, from a 6.6 percent on
    average over the previous five years, to less than one-half of
    one percent over the last 12 months.
        As companies spend far less on research development, the
    sector is down by more than 14,000 jobs. Three quarters of
    research and development spending is on wages and salaries,
    making R&D amortization primarily a jobs issue.
        Mr. Tredway, as a businessman in the manufacturing space,
    can you tell us how the exploration of the provisions has
    impacted Erie Molding Packaging?
        Mr. TREDWAY. So for Erie Molded, I mean, again, first tier
    sort of caught us off guard, so immediately we had a tax that
    we weren't expecting. Now, we can of course, depreciate those
    expenses down the road later, but I need to make those
    decisions now and have that money to reinvest in my company and
    my people now. So initially it was money out of our pocket that
    we were not expecting.
        Looking to the future, we will still do some R&D, but we're
    going to look at it differently. It's different math now. Now,
    like I said, for us, 90 percent. It sounds like industry
    average is 75 percent goes to wages. I know that the more I put
    into R&D, the more I'm setting myself up for a higher tax bill
    every year. And so it's going to change the math for us. So
    Yeah, it's a big problem.
        Mr. ESTES. Yeah, which makes it really damaging for your
    cash flow as you highlighted earlier in terms of having to pay
    out of your pocket this year for the research and development
    and then not being able to write that off and on taxes to
    recoup that expenditure.
        Mr. TREDWAY. Yeah, and for small businesses like ours, cash
    flow is just--it's everything. So it definitely changes the
    arithmetic for us.
        Mr. ESTES. Thank you. This Committee knows how important
    immediate R&D expensing is, which is why in January we passed a
    tax relief for American Families and Workers Act that included
    immediate R&D expensing. I'm still hopeful that my colleagues
    in the Senate will take up this legislation. And in the
    meantime we'll keep pushing ahead to ensure provisions are
    restored and strengthened in 2025 and beyond. Thank you, Mr.
    Chairman, and I yield back now as well.
        Chairman KELLY. Thank you, Mr. Estes. Now recognize Mr.
    Smucker from Pennsylvania for five minutes.
        Mr. SMUCKER. Thank you, Mr. Chairman. Thank you for the
    opportunity to be here. This is great, hearing Mr. Whiting and
    seeing what's happening in the community here was just so
    wonderful to see the commitment that's been made and the
    benefits that you're seeing.
        I represent Lancaster County in Pennsylvania. As many of
    you know, Lancaster County is on the other side of the State,
    but we had a similar--years ago I was in the State Senate and
    then I've been in Congress now for eight years and Lancaster
    city was in bad need of revitalization and there was a catalyst
    of business owners there similar to what I've heard here. Who
    really we started with the convention center and then a
    ballpark. And then you saw the effects of that over a period of
    years and decades of that initial investment, that initial
    risk, and they also took government help because we just
    sometimes can't make any initial project work, but you see the
    benefits.
        So really, really great to see similar things happening
    here and I'm so glad that the Opportunity Zone is a part of
    that. I also want to mention the Businessowner, Mr. Tredway,
    Mr. Spore, I've been a businessowner for a long time, and
    really proud of the work that we did in the Tax Cuts and Jobs
    Act and the impact. I appreciate, Mr. Tredway, you mentioned
    the 20 percent deduction, the 199-A, which is really important
    for the past three organizations.
        I do want to go back to something that Ms. Moore said, and
    that is, you know, some of the individual rates were not
    permanent and I agree, they should be made permanent and, in
    fact, they should have been permanent from the very beginning.
    We weren't able to do that because we didn't have enough--we
    didn't have Democrat support, frankly, in the Senate side. So
    we had to do it through the budget reconciliation process,
    which has specific scoring. So were not able to do that. But
    Ms. Moore and everyone else will have an opportunity to make
    those permanent because we'd like to do that next year.
        We think it's very, very important if we don't make these
    provisions permanent, it will be a big tax increase on the
    middle class. It will be a tax increase on small business who
    are generating all the jobs. And so we hope to have that
    opportunity and we hope that's done in a bipartisan way where
    we really make these things permanent. It really should be.
        So I want to get back, Mr. Tredway, to the 199-A, like,
    we're going to have to build support for that. We're going to
    have people understand, even businessowners understand, the
    impact of that. How do we build that? And we're working right
    now, we have tax teams that Chairman Smith has put together. We
    want to take this out, have people understand, the American
    people really understand the Importance of this policy. Do you
    have any ideas for us? How do we get out and talk about this?
        Mr. TREDWAY. That's a great question, because it's--you
    know, it's not the most straightforward of all the tax codes,
    right. But it makes a ton of sense. And for small businesses
    like us to be against corporations, if we don't keep that in
    place we're not losing another step on the ladder when it comes
    to how we're taxed.
        So I mean, you know, I know where I talk about taxes the
    most, just speaking my own experience. A lot of it's through
    trade organizations that I'm a part of. Trade associations, we
    always have an accountant that's involved who's talking about
    just general talking points and how we should be planning for
    the future, which again can be a challenge because the rules
    change too often, and make these things permanent. Any local
    training associations, there's one here in----
        Mr. SMUCKER. We'll do that. I'm going to--I'm going to cut
    you off because there's two additional points I want to make
    and I only got--I have a little bit over a minute. One, I'd
    love Mr. Hawkins, and I'm not sure I'm going to give you time
    to answer this, but you know, we really want this program to
    improve and we're going to have an opportunity next year to do
    that. So I'd love to hear from you. Maybe you can do it later.
        What would be some of the key things that you think would
    better ensure that this program is working for more communities
    like it's worked at Erie. And the other thing I want to be sure
    of is that we're incentivizing new dollars that would not have
    been invested otherwise. I'd love to, at some point, hear your
    thoughts on that.
        And then, Mr. Whiting, I'd love to hear from you, and I've
    run out of time, so you won't be able to answer either, but one
    of the things we learned in Lancaster, that it was a different
    thing to have all of that new development actually result in
    better standard of living for the residents of the city, and
    better jobs that residents were taking. And over time, that's
    starting to happen, but we want to find a way to make sure that
    all this new development connects with workers and improves the
    lives of people in the city. So I'd love to hear your thoughts
    on that.
        We don't have time. We found--as I said, it took a while
    for that to occur. And so, Mr. Hawkins, if you could even maybe
    provide to the Committee, your recommendations of key changes
    that we should make, and then how do we----
        Mr. HAWKINS. Absolutely.
        Mr. SMUCKER [continuing]. Connect that to ensuring that
    we're all residents, not just business owners.
        Because really, the purpose of the Tax Cuts and Jobs Act,
    the purpose of incentivizing business, is to create great jobs
    and to raise the standard of living for the entire community.
    That's what we want to get to. So I'd love to hear from both of
    you, maybe, how that's worked here, and what ideas that we have
    to ensure that happens. So, thank you. Sorry I went over time,
    Mr. Chairman.
        Chairman KELLY. No, Mr. Smucker, you know, because we're so
    limited, five minutes isn't really enough, but I hope this just
    begins a dialogue that you feel comfortable doing with us.
    Because the Chairman's idea to begin with was to take the
    Congress out into the country so you could have a face-to-face
    talk back and forth. And I think what Mr. Smucker just talked
    about, there's so much more that we have to be able to sit down
    and talk about to see where you all are in this, and how we can
    make the government truly work for you.
        I now recognize the Gentlelady from Texas, Ms. Van Duyne.
        Ms. VAN DUYNE. Thank you very much. It's great to be here
    in Erie today. And Mr. Chairman, thank you very much for
    hosting us.
        Congressional Republicans know that pro-growth tax policies
    work for American families, for workers, and for small
    businesses, and following the 2017 Trump tax cuts, individuals
    and families reaped the benefits. Real wages grew by 4.9
    percent in 2018 and 2019. Fastest two-year growth in real wages
    in 20 years.
        Similarly, from 2017 to 2019, more than 6.6 million people
    were lifted out of poverty, dropping the poverty rates to 10.5
    percent, the lowest level in U.S. history. The Real Median U.S.
    Household Income in 2019 rose nearly 50 percent more than
    during eight years under President Obama's leadership. And
    according to the Federal Reserve, low and middle-income
    families received the largest increase in wealth during 2018
    and 2019.
        And I don't want to disagree with my Democrat colleague,
    but when they talk about the $400,000 that people make not
    having taxes raised on them, I would argue that according to
    the Congressional Budget Office, that the tax cuts that were
    signed in the law by then President Donald Trump that are said
    to expire, that if they do expire, the vast majority of U.S.,
    the vast majority of U.S. households would see their payments
    to the IRS increase. That the Trump's 2017 overhaul cut the
    corporate tax rate of 21 percent, intending to make it more
    competitive internationally. The law also temporarily cut the
    income taxes paid by most U.S. households, in part by trimming
    marginal tax rates and increasing the standard deduction.
        As a result of these changes, Non-Partisan Tax Policy
    Center estimated a family of 40th to 60th percentile of earners
    would average save $930 annually.
        And when we talk about the $400,000 as a mark, the fact
    that we're facing now 20 percent inflation means that has
    eroded Biden's promise on wage increases and it's pushed more
    people from $400,000 tax bracket. So a salary of $330,000 now
    would be worth $400,000 in today's dollars. So that needs to be
    taken into account. But in the face of major tax sites and
    looming sunsets, republicans will take action to ensure that
    American families and small businesses are not hit at higher
    tax rates or watered-down guaranteed deduction in child tax
    credit that's cut in half.
        I'm excited to work on the tax teams that this Committee
    has put together and ensure we help create growth for small
    businesses, such as the ones we saw today. One of the areas I
    want to address is looking at how small businesses access
    capital and threats we see from this administration. We even
    saw this a few weeks ago from the Treasury, who repeated
    misguided attacks on carried interest loophole. We've also seen
    in every single budget that's been put out by this president.
        Mr. Whiting, you stated a venture fund--you started a
    venture fund to help provide capital to small startup
    companies, to start companies. Can you discuss the challenges
    some of these small businesses face and what would happen if we
    allow the 2017 tax cuts to expire?
        Mr. WHITING. So the challenges that they face are in
    getting the risk capital needed to grow. Not at the very early
    stage, not when they've reached a point of somewhat success in
    product market fit, but it's really in that--IN THAT space
    where they need angel investors and community investors to come
    to the aide of those companies. In 2014, I helped with some
    draft legislation for the Illinois Angel Investment Tax Credit,
    and I brought that up to people in Pennsylvania when we were
    there down Harrisburg last week. That kind of tax credit could
    be something that's really useful for everybody in this country
    and could be a federal-type of thing.
        I would encourage additional investment in those businesses
    at those times. As far as the sunsetting of some of the TCJA
    provisions, I think Opportunity Zone funds can be used as a
    predicate to getting capital of any small businesses. It is not
    limited to real estate at the moment. There are restrictions,
    but I think that can be expanded.
        Ms. VAN DUYNE. All right. Thank you. Mr. Tredway, we
    continue to see proposals from this Administration, such as
    changing the long-term capital gains and qualified dividends of
    the ordinary income work for taxpayers, which could potentially
    double the tax rate from 20 percent to 39.6 percent.
        How detrimental would this change be for small businesses
    looking to access capital?
        Mr. TREDWAY. I mean, it would be a significant impact on
    companies like ours. You know, you're--again, you're taking
    that much capital, that much cash out of where we want to put
    it back into business, back in our people, back in capital and
    now we have to give it to the federal government. And that's
    money we need to do to remain competitive, not against, just
    against corporations who aren't pass- through companies, but
    also, of course, international. We don't compete in a vacuum,
    we compete globally. So it would be a major impact.
        Ms. VAN DUYNE. Mr. Spore, in the few seconds I have left,
    we've also seen interest rates at a 30-year high. Can you tell
    me how that has affected your business in having given access
    to capital?
        Mr. SPORE. I haven't had to do that.
        Ms. VAN DUYNE. Okay.
        You haven't had--Mr. Tredway, can you tell me how small
    businesses have been affected by the highest interest rates
    we've seen in three decades?
        Mr. TREDWAY. It makes the loan payments a lot different.
    And again, it's factoring in the decisions that we're--you
    know, borrowing a million dollars looks a lot different today
    than it does before, so, you know, a couple years ago. So now
    we have to--we aren't investing probably quite as much as we
    have in the past, you know, before interest rates start to go--
    hike up as much as they have.
        Ms. VAN DUYNE. Thank you and I yield back.
        Chairman KELLY. Thank you. The General Lady from New York,
    Ms. Malliotakis for five minutes.
        Ms. MALLIOTAKIS. Well, thank you very much, Mr. Chairman.
    Opportunity Zones and Tax Cuts and Jobs Act passed by the
    Republican Congress with President Donald Trump were pro-
    growth, pro-jobs policies that benefit the American people and
    businesses. We saw real wages grow by 4.9 percent in the first
    two years that followed, making it the fastest two-year growth
    in two decades. 6.6 million Americans were lifted out of
    poverty, dropping the poverty rate to 10.5 percent, the lowest
    level in American history. And in 2019, the Real Median
    Household Income rose nearly 50 percent more than during the
    eight years of the Obama/Biden Administration.
        But state politics matter just as much, and according to
    the Tax foundation, state business climate in my home state of
    New York is number 49, 49th Worst out of 50. Here in
    Pennsylvania, it's 31. My State, New York, is home to 514
    Opportunity Zones and my District is home to 13 Opportunity
    Zones; eight on Staten Island, five in Brooklyn. All of the
    Staten Island's Opportunity Zones are located in the lower
    income, mostly minority sections of the Staten Island's North
    Shore, which can desperately use the private investment and
    revitalization, which is the exact point of the program. But
    the lawmakers in Albany have prevented New York's Opportunity
    Zones from achieving their full potential.
        In 2021, New York stripped some of the state level tax
    benefits created under the federal program, but left in a tax
    exemption on capital gains from opportunities on investments
    that were held for at least ten years. Last Monday, the State
    Senate voted, however, 41 to 20, to approximately approve the
    measure of fully decoupling the state from the Opportunity
    Zones program. And these are the same people that drove out the
    potential Amazon headquarters out of, you know, Queens, even
    after the company said they would not reap the benefits of the
    deferred tax.
        So my question is to Mr. Hawkins, can you help my lawmakers
    in the State of New York understand what they're missing out
    on?
        Mr. HAWKINS. Right. What I would impress upon the state
    legislature there is that it is absolutely critical for the
    success of the policy. And when I say success, I mean in terms
    of benefiting the lives across a number of economic measures of
    the existing residents of Opportunity Zones, that they
    implement supportive local legislation to make sure that the
    policy is effective as possible.
        When Congress passed Opportunity Zones, they gave governors
    who were designating the zones, who were picking the places
    where this investment could occur, three non-binding criteria
    for picking the zones. The first was an area where there was
    significant economic distress, areas that have been disrupted
    through technology changes or outsourcing or those kinds of
    things.
        Second, they asked--they asked governors to look for areas
    where there was opportunity, where an investor could turn a
    dollar into five dollars. And third, they asked governors to
    look at areas where there could be usually reinforcing state,
    local and federal policy that could really help target these
    investments in the area where they need it most. And so certain
    states have been very aggressive.
        Next door in Ohio, our government implemented a 10 percent
    state income tax credit that can be literally sold at 80 cents
    on the dollar for all investment in Opportunity Zones. That
    allows us two things. One, it drives a lot of investment into
    the most distressed areas. But second, it allows the state of
    Ohio to track opportunities on investment all across the state
    in the absence of federal reporting requirements.
        And so, I mean, I would emphasize the legislature there in
    New York that this is a great policy that's changing lives and
    they should absolutely support it----
        Ms. MALLIOTAKIS. And the private investment outweighs the
    costs of the state, number one.
        Mr. HAWKINS. Absolutely.
        Ms. MALLIOTAKIS. And you're creating jobs in these
    depressed communities, number two. We saw Mr. Whiting today;
    appreciate the tour you gave us. We're seeing the private
    investment, the buildings that have been revitalized now
    occupied, the jobs, and the shops, and the housing and tax
    revenue is coming not by hammering people over the head like
    they're ATM machines. It's actually coming because the
    community is more prosperous and there's more tax revenue as a
    result.
        So my last question is for Mr. Spore.
        You're absolutely right when you say New York City has the
    best pizza. We'd love to know those two restaurants. You can
    tell me after. You don't have to say it on the mic. But thank
    you very much and I yield back.
        Chairman KELLY. Thank you for letting us know where the
    best pizza is.
        Ms. MALLIOTAKIS. It's got to be from Brooklyn and Staten
    Island, that's for sure.
        Chairman KELLY. Thank you, Ms. Malliotakis. Next, Ms.
    Miller from West Virginia for five minutes, please.
        Ms. MILLER. Thank you. I think I'm at the tail end as a
    matter of fact.
        I'm Carol Miller from West Virginia. I was born and raised
    in Columbus, Ohio. For those of you who think about that, for
    some strange reason, I think it must be Kismet, I decided not
    to go to Ohio State, but to go to a small women's college in
    Columbia, South Carolina. I met my West Virginian in South
    Carolina 51 years later. I love West Virginia. I love the
    people. And a lot of you in this room probably have relatives
    either in Southern Pennsylvania or in West Virginia. We are
    very much the same people.
        I think we've established the importance of keeping the Tax
    cuts and Jobs Act. It's so important and what's coming ahead.
    I'm a small businessowner. I shake my head. I mean, I bought
    apartments when I still had kids in diapers. I painted them
    when I couldn't afford somebody else to do it. I've been ankle
    deep in sump pump water. I've had my hands down the back of
    toilets.
        I'm a businessowner. I'm an LLC. I am not a bad person for
    being a corporation. And I can remember those huge printouts
    every time I had to make a payment, I'd mark it off. My
    interest was huge. My principal was like $45 month after month
    after month. People who make policy don't often understand the
    risk that people in business take. Small businesses in
    particular. And those small business people are the ones that
    support the Little League teams, that help the Boy Scouts and
    Girl Scouts. They're the ones that are reinvesting in their
    people and in their community.
        West Virginia is about 95 percent small businesses. So now
    I'll go back to my notes. I do represent rural West Virginia,
    and we live in a community that's very similar here. When I
    moved from Columbus, Ohio, we had 600,000 people and my
    community had about 90. And I thought, what a charming small
    town. There are 50,000 people in my city right now.
        We have suffered from bad policy and bad ideas, but like
    these Opportunity Zones, they have become a very effective tool
    to help investment in our communities. I saw our glass plants.
    I saw so many plants leaving in the 1980s and in the 1990s
    because of policy. So it's so important that we do what we do.
        I'm an original Co-sponsor of Chairman Kelly's Opportunity
    Zones and Transparency Extension and Improvement Act, and I
    strongly support it. Mr. Hawkins, thank you for working to help
    develop the Opportunity Zone policies. You know, we've seen the
    impact in our communities across the country, and it's really
    great to be here in Pennsylvania and drive around in this
    beautiful town and see the before, the during and the after.
    I'm very impressed with that.
        So I do want you, Mr. Hawkins, to give us some of your
    wonderful ideas on how we can do better and how we can target
    in our communities. And I know we probably don't have enough
    time for you to give us those pearls, because I've heard some
    of the things you've said, but it's just so, so important that,
    you know, we benefit from these Opportunity Zones.
        Mr. Whiting, thank you for being here. And I'm impressed
    what I heard about Erie's development today, and, you know, got
    to be with you earlier in the day. We're developing--
    redeveloping Huntington and Charleston along our main streets
    in our town. Can you explain how long it's taken for Erie to
    see the benefits of the Opportunity Zone program and why it's
    so important that it should be extended?
        Mr. WHITING. We're at the beginning of our seventh year of
    action on this right now.
        Ms. MILLER. Seventh.
        Mr. WHITING. And I would say that we're probably a year
    and-a-half into seeing some of these benefits. It does take a
    while. That's because development takes some time and for the
    effects to take hold after that, will take time as well. We
    need more time.
        Ms. MILLER. Well, housing is also a big issue in West
    Virginia and in my district and we do have access to more
    recent data which indicates that OZ's have had such a
    significant impact on adding to our housing supply. And so, you
    know, it's up from eight percent before designation. So we also
    know that this new activity has a positive spillover in our
    neighboring communities.
        Can you also speak about your experiences of using OZ's to
    address the housing shortage here in Erie?
        Mr. WHITING. Yeah. Our OZ work has resulted in about 110
    new apartments where 14 existed prior. It's also spurred on
    additional activity that has led to efforts at more supportive
    and low-income affordable housing around the community. We have
    something to work for here now. This is a place worth investing
    in. This is a place worth creating new housing in now. And so
    the organizations like the Hammond Health Foundation, the
    Community foundation are doing that work, and I'm not sure that
    there would be the impetus to do it ten years ago.
        Ms. MILLER. I agree with you. And Mr. Spore, I want some
    Ippa. Thank you all of you for being here and taking the time
    today. We really appreciate it. God Bless you.
        Chairman KELLY. Thank you. Thank you all for being here.
    Just before we quit, I was just talking with the Chairman. So
    this is a tenth meeting we've had. and his idea from day one
    was to take the Committee out of Washington and take it to the
    country so that you can have face-to-face contact; you could
    actually have dialogue, you could give us your true feelings on
    things. I think if there's one thing missing today, it is our
    inability to communicate with each other on a calm level,
    actually exchange ideas. What's in the best interest of people
    we represent?
        By the way, there are quite a few elected officials here
    today. They're all sitting in on this. I appreciate you all
    being here. And where is Barry Copple? Barry's in the back of
    the room. Raise your hand, okay, so we can say hi to you. There
    he is. There's Barry Copple. Now why do I bring that up? We've
    had an opportunity to go through the most magnificent building
    and people say, well, how the heck did they do this? Now
    remember that the Warner Brothers started this in 1929. Not the
    best year for the economy in American history.
        Now I thought it's fascinating because we talk about
    inflation. The Warner Brothers invested $1.5 million in the
    construction of this magnificent building with memories that
    last forever when they replaced the front marquee, the cost of
    replacing the marquee, just the marquee, was $1.5 million. So
    that's inflation, but you all being here, the tenth meeting
    we've had around the country, I don't know that we've had a
    better turnout than this, and I want you to understand that if
    you have something to add----
        So we have--I'll read this to you because it's important
    that you know this. Please be advised that members have two
    weeks to submit written questions and be answered later in
    writing. I want to tell the people that are here, we're going
    to be here for a few minutes. If you want to have any type of a
    conversation with us, please don't be shy. I've been in Erie.
    I'm kind of used to this after 12 years, none of you are shy.
    Please don't hesitate to interact with us.
        But to my colleagues, I thank you all for being here today.
    This was really, really important to us, important to this
    Committee and congratulations on everything you've done. With
    that, the Subcommittee is adjourned.
        [Whereupon, at 5:41 p.m., the subcommittee was adjourned.]

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