[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
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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
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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
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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
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CREATING MORE OPPORTUNITY AND PROSPERITY IN THE AMERICAN RUST BELT
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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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