[Congressional Record Volume 142, Number 11 (Friday, January 26, 1996)]
[Senate]
[Pages S499-S502]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 1533. A bill to provide an opportunity for community renewal and 
economic growth in empowerment zones and enterprise communities, and 
for other purposes; to the Committee on Finance.


       the community renewal and economic opportunity act of 1996

 Mr. McCAIN. Mr. President, today, I am pleased to introduce 
the Community Renewal and Economic Opportunity Act of 1996.
  The bill contains 10 major initiatives to revive communities 
afflicted by joblessness and crime and to help the neediest Americans 
better provide for themselves and their families.
  Included in the bill are measures to foster new job opportunities and 
economic development in America's poorest communities through targeted 
tax incentives; to improve public infrastructure in blighted areas by 
channeling a greater percentage of Federal grant monies to the neediest 
communities and by lowering the cost of project construction; to 
invigorate the fight against violent crime which most seriously affects 
low-income neighborhoods by allowing local law enforcement agencies to 
keep a greater amount of forfeited criminal assets and by requiring 
family opportunities for needy innocent victims; to increase family 
opportunities for needy children by banning racial discrimination in 
adoption; and to promote voluntarism by protecting volunteers against 
liability.
  All Americans, no matter who they are, where they live, or the color 
of their skin, deserve the opportunity to provide for their families, 
to pursue their aspirations and to share fully in the American dream.
  History teaches us that there's no panacea for poverty and crime, 
but, no matter how intractable the problem, it is the essence of the 
American character to constantly advance our society so that the social 
and economic progress of each generation exceeds that of its 
predecessor. No American is unimportant. As a nation, we have a solemn 
obligation to help those in need to help themselves. Our success in 
that endeavor is bound only by the limits of our energy and 
imagination.
  It is painfully clear that the traditional welfare state response to 
poverty and community decay has been a miserable failure. Over the past 
30 years, we have spent over $5 trillion on poverty programs, yet 
millions of Americans remain ensnared in the grinding cycle of 
dependence and need. The time is now for new ideas and approaches to 
restore hope and increase economic opportunity for all Americans.
  The most effective way to revive American communities mired in 
poverty and to improve the quality of life is to provide job 
opportunities and sustainable economic development. A job and a 
paycheck are the most effective welfare programs. And, as any mayor or 
city council member in our country can attest, a healthy tax base 
produced by an employed population is the most potent prescription for 
community renewal.
  Accordingly, the first title of the bill authorizes a battery of new 
and expanded tax incentives to attract businesses to blighted areas and 
to hire economically disadvantaged residents.
  Four years ago, Congress designated 9 of the poorest communities in 
America as enterprise zones and 90 others as enterprise communities. 
The designation made these communities eligible for a host of tax 
incentives and other community renewal programs. This was an excellent 
step but inadequate in scope.
  Currently, the law provides special tax benefits only to enterprise 
zone businesses which hire at least 35 percent of their employees from 
the local community. The bill I'm introducing would enhance the tax 
incentive by allowing firms to take an additional ten percent tax 
credit if they increase their local hiring rate to 50 percent.
  Furthermore, the bill extends eligibility for the credit beyond 
enterprise zones to include qualified businesses within the 90 
enterprise communities, as well as 90 additional poverty stricken 
economic recovery areas--areas 

[[Page S500]]
which will be designated by the Secretary of Housing and Urban 
Development.
  Many communities are suffering economic distress as deeply as the 
areas we have officially designated as enterprise zones, and they 
deserve the opportunity to attract the jobs and economic development 
they so desperately need.
  Mr. President, the 10-percent tax credit will serve as a strong 
incentive for businesses to form within economically depressed areas 
and to increase the hiring of local residents. However, the bill I'm 
introducing today would also authorize what I believe might be an even 
more powerful alternative inducement--a low 10-percent flat tax.
  The bill would allow businesses within federally designated 
enterprise zones, enterprise communities, and economic renewal areas 
which hire at least half of their employees from the local community to 
pay a simple 10-percent flat tax. Simplifying taxes and offering a low 
incentive rate as an alternative to today's excessive and byzantine tax 
rules, might prove to be the most potent inducement for businesses to 
invest in places and in people that need the helping hand.
  I look forward to hearing from employers on the relative merits of 
the flat tax and the credit option.
  No matter which option an employer might choose, it's clear that once 
a company has opted to locate within a blighted area and to assume the 
associated risk, one of the biggest challenges will be to attract the 
capital and investment necessary for the enterprise to survive and 
grow.
  To address this need, the bill once again would use our tax system to 
stimulate the necessary investment. Specifically, the bill would make 
stock dividends from qualified enterprise zone and enterprise community 
businesses nontaxable, and it would eliminate the capital gains tax for 
investments held at least 5 years within designated enterprise zones, 
enterprise communities and economic recovery areas. Exempting dividends 
and capital gains within our poorest areas from taxes should attract a 
healthy flow of job-producing capital investment.
  So, Mr. President, this bill provides substantial new tax-based 
incentives for companies to assume the risk of locating within blighted 
areas and to invest in their human resources. However, we must 
recognize that poverty and economic disadvantage do not confine 
themselves within certain municipal boundaries. Economically 
disadvantaged people reside in practically every community and we have 
an obligation to help these Americans even if they do not happen to 
live within areas of the most severe poverty.
  Accordingly, the bill would expand the work opportunity tax credit 
passed by Congress last year. The bill would raise the credit from 35 
percent for the first $6,000 in wages for a targeted economically 
disadvantaged employee to 35 percent for the first $12,000 in wages.
  Expanding the credit will provide a greater incentive for businesses, 
no matter where they are located, to hire economically disadvantaged 
individuals; and will discourage the practice of rapidly turning over 
employees in order to maximize the tax credit.
  Most importantly, the bill expands the list of individuals who 
qualify for the work opportunity tax credit. As currently conceived, 
the credit would be available only to residents of enterprise zones and 
enterprise communities; recipients of AFDC; vocational rehabilitation 
recipients and Summer Youth. The bill extends the credit to individuals 
who have been chronically unemployed, have few assets, and have been 
living for a significant period of time under the poverty level.
  A flexible, transportable, and more widely applied credit will help 
needy individuals no matter where they reside or by whom they are 
employed.
  Mr. President, we all recognize that it's one thing to attract 
businesses to the poorest communities and encourage them to hire the 
most economically disadvantaged Americans by sweetening the tax 
incentives, but ensuring that such firms are sustainable and can 
overcome the many risks they assume to succeed in quite another.
  Accordingly, the second major thrust of the bill's first title is to 
use the purchasing power of the Federal Government to assist risk-
taking entrepreneurs and corporations who are willing to help poor 
Americans.
  The bill would accomplish that goal by reforming the Small Business 
Administration's (8)(a) set-aside program. The current program provides 
Federal contract set-asides to businesses based on the race or 
ethnicity of the business owner. The bill would reorient the program by 
making the set-asides available to businesses that hire economically 
disadvantaged Americans regardless of their race, creed, or color.
  As my colleagues are aware, the current (8)(a)program has been rife 
with fraud and abuse. The record is replete with unsavory examples of 
unscrupulous individuals establishing shell corporations to obtain set-
aside benefits and cases in which very wealthy and successful 
enterprises remain in the program when they can and should compete 
quite nicely through the normal competitive contracting process.
  Mr. President, America is based on the concept of equality among all 
people. As a society that aspires full equality and color blindness, 
the time for special programs that focus on the race and ethnicity of 
particular Americans rather than their economic status is past. A needy 
American is a needy American no matter their race, creed, color, or 
gender. Certainly, the Supreme Court's decision in the Adarand case 
emphasized that reality that, by and large, race-based set-asides do 
not comport with the fundamental tenets of equality and equal 
protection.
  The original purpose of the 8(a) program was to assist economically 
disadvantaged Americans without regard to race or gender. I believe we 
can return the program to its original intent, and assist far more 
needy people than today's ownership-based program by providing set-
asides to businesses located within enterprise zones and communities as 
well as to other firms which train and employ a significant percentage 
of economically disadvantaged individuals.
  Exactly how do we determine who is an ``economically disadvantaged 
individual''? For purposes of this bill, EDI's are defined as: (1) 
individuals who live within EZ's or EC's; (2) individuals who have 
assets no greater than the ceiling allowed for AFDC eligibility; who 
were not claimed as a dependent for 4 years preceding the date of their 
hiring; and whose income did not exceed the poverty level in either the 
year before their hiring nor in 3 of the 4 years before their hiring; 
or (3) individuals with a dependent; who have assets no greater than 
the ceiling allowed for AFDC eligibility; who were not claimed as a 
dependent for 4 years preceding the date of their hiring; and whose 
income did not exceed the poverty level during the year prior to their 
hiring.
  Once designated as an EDI an individual would retain the designation 
for 5 years, which should be ample time for the employee to receive 
training and to establish a work history. Reorienting the 8(a) program 
as provided by this bill will help us to achieve the goals of assisting 
economically disadvantaged individuals more fairly and effectively.
  Finally, Mr. President, the first title of the bill recognizes the 
important role private entrepreneurship can and should play in serving 
the needs of our poorest communities and that we must do a better job 
of promoting start-up enterprises. Toward that end, the bill would 
establish a business mentor program under the auspices of the Small 
Business Administration. The program would pair businesses owned by 
economically disadvantaged individuals with mentor businesses and 
lending institutions.
  Pairing start-up enterprises owned by individuals who live within 
poverty stricken areas with established mentor businesses will enhance 
the success of first-time business owners creating additional jobs and 
economic opportunity.
  Mr. President, again, I want to stress a bill cannot be written that 
will solve the problem of joblessness and poverty. But, I believe we 
can make significant gains by employing the kinds of incentives 
proposed by the bill I've introduced today. The incentives are not 
perfect and I look forward to a detailed debate on the initiatives to 
ensure that we craft incentives that will be as appropriate and cost-
effective as possible.
  Mr. President, the second major title of this bill is designed to 
assist depressed communities in improving their infrastructure. Strong 
infrastructure and dependable public works such 

[[Page S501]]
as roads, utilities, schools, and other public accommodations, are 
critical to improving the quality of life and to fostering sustainable 
community development. This bill would lower the cost of constructing 
and operating public facilities by repealing the the Davis-Bacon Act 
within enterprise zones and enterprise communities.
  The Davis-Bacon Act requires that the prevailing union wages be paid 
on all contracts and subcontracts for construction projects that 
utilize Federal monies. This costly Federal mandate inflates the price 
of infrastructure and disproportionately impacts poorer communities. 
Moreover it makes it more difficult for entry level job seekers to 
obtain training and work.
  In addition, the bill would channel a greater share of Federal 
Community Development Block Grant moneys to the neediest counties and 
cities.
  The Federal CDBG program was created to promote local economic and 
community development. Current law requires that 70 percent of these 
grant monies be channeled to disadvantaged communities. The bill 
increases the amount to 75 percent and cuts the percentage allowed for 
administrative overhead from 20 percent to 10 percent so that more 
dollars can flow to bricks and mortar projects in needy areas.
  Furthermore, the bill would require wealthier communities to cost-
share any CDBG grants they may receive. Greenwich, CT and Beverly 
Hills, CA are fine communities, but we should not be spending scarce 
Federal economic development aid in communities that can well afford to 
meet their own needs, at the expense of much needier areas.
  The third title of the bill seeks to improve educational 
opportunities in the poorest communities. Quality education is the key 
to improving the lives of our youth and helping to break the cycle of 
poverty.
  The bill authorizes a Federal school voucher system within enterprise 
zones and enterprise communities. Empowering parents to send their 
children to the schools that best meet their needs will increase the 
quality of educational opportunity. The program would in no way require 
the affected local school districts to diminish or reallocate their own 
funding. The Federal monies would be additional to the local funds 
currently used to run the affected school districts.
  The fourth title of the bill seeks to make our streets safer. The 
gravest threat to quality of life and community redevelopment within 
blighted areas is violent crime. The streets must be made safer and 
victims must be treated compassionately and justly.
  The bill allows counties and cities which have a high rate of violent 
crime to retain a higher share of Federal asset forfeiture proceeds 
under the Racketeer Influenced Corrupt Organization (RICO) statutes.
  Current law allows local law enforcement agencies which participate 
in a Federal RICO operation to have a share of the proceeds from asset 
forfeiture. The bill would authorize an additional 25 percent share for 
communities that suffer from inordinately high rates of violent crime. 
The additional resources would be used for violent crime control 
programs.
  In addition, the safe streets title authorizes mandatory restitution 
for certain violent crimes, and increases victim assistance resources 
by boosting fines against Federal felons. This title mirrors 
legislation that I had the privilege to work on with Senator Hatch, 
Senator Nickles, Senator Biden, and other Members last year.
  The bill's fifth title seeks to promote family opportunities for poor 
children. The family unit is the foundation of our society. A loving 
and supportive family is the key to a child's development into a 
healthy and productive member of the community.
  The bill prohibits racial discrimination in adoption. Many adoption 
agencies make adoption decisions based on inappropriate racial 
considerations. Consequently, countless children, many of them 
minorities from the inner city remain in foster care, denied the 
opportunity for a loving family.
  Finally, the bill seeks to promote voluntarism. America has a proud 
tradition of neighbor helping neighbor which must be nurtured and 
sustained if we are to revitalize America's communities, particularly 
those poverty stricken areas most needful of help.
  The bill encourages states to pass laws protecting volunteers against 
lawsuits. The provision is modeled after legislation introduced by 
Congressman John Porter of Illinois. It's fundamentally unfair that we 
continue to subject volunteers to the threat of liability when they 
share their time, resources and expertise to help the community. 
Increasing exposure to liability in our ever litigious society will 
chill voluntarism to the detriment of all communities.
  Mr. President, as I said, I do not pretend this bill is the answer to 
all our inner city problems. Far from it. But, I believe it provides 
some excellent initiatives which will help us make a real difference in 
improving lives and communities of areas that need and deserve the help 
of a caring nation.
  Moreover, I am convinced we can enact these or very similar 
initiatives without worsening the deficit. The programs that require 
outlays or offsets, such as the package of tax credits, can be paid for 
by reductions in non-essential programs that are of a lower priority 
including, I might add, corporate pork.
  This bill is by no means perfect or complete. I believe it is a 
starting point for more vigorous debate and action to meet the 
challenges of the poorest Americans and the neediest communities. I 
look forward to a dialogue on the bill and the issues it raises, and to 
hearing the many other suggestions about how most effectively to end 
the cycle of poverty and dependence.
  One suggestion I would make is that the appropriate committees hold 
field hearings and engage the Americans who live in the poorest 
communities in the debate over how best we can help them to meet the 
needs of their families and their neighborhoods.
  Too often politicians cloak themselves within the insulated, and many 
times, out of touch environs of the Capitol as we devise the policies 
that affect millions of lives. Perhaps it's time we more diligently 
consult and work with real people and address their realities as we 
endeavor to meet our oath of office and the needs of our great Nation.
  I am pleased to note that his bill is strongly supported by Secretary 
Jack Kemp of Empower America. Such an endorsement is germane and is as 
fitting as it is welcome, because personal and community empowerment is 
what this bill is about. It's about new alternatives to the failed 
prescriptions of the past. It's about recognizing that every American 
counts and that a leg up to self-sufficiency is more lasting, 
meaningful, and compassionate than a handout; and that a caring nation 
can and must help all of those who truly need assistance to participate 
in the social, economic and political freedom that is the essence of 
the American dream.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

         Community Renewal and Economic Opportunity Act of 1996


                 title i--jobs, paychecks, and tax base

       The most effective way to revive America's poverty stricken 
     communities and to improve the quality of life for 
     economically disadvantaged residents is to stimulate job 
     creation and sustainable economic development--jobs, 
     paychecks and tax base. This title provides a battery of new 
     and expanded incentives for businesses to form and capitalize 
     within blighted areas and to hire local residents.
     I. Tax credits and businesses that hire economically 
         disadvantaged individuals within blighted areas
       Enables each qualified business located within a federally 
     designated Enterprise Zone and Enterprise Community to deduct 
     ten percent of its tax liability if 50 percent of its 
     employees are residents of the zone.
       Current law provides special tax incentives to businesses 
     within the 9 designated Enterprise Zones if 35 percent of 
     their employees are residents of the area. Increasing the 
     incentive and expanding it to the 90 enterprise communities 
     and beyond (see below) will increase employment opportunities 
     for residents of blighted areas.
       Authorizes the Secretary of Housing and Urban Development 
     to designate an additional 90 poverty stricken communities in 
     which businesses would be eligible for the 10 percent 
     negative surtax.
       Many communities are suffering the same economic distress 
     as areas designated to be Enterprise Zones and Communities. 
     Extending the credit to other economically distressed areas 
     will stimulate job creation and tax base.
     
[[Page S502]]

       Authorizes zero capital gains tax for investments held for 
     at least five years within Enterprise Zones and Economic 
     Communities.
       A zero capital gains tax will spur investment and economic 
     activity within economically depressed areas.
     II. Tax incentives for hiring economically disadvantaged 
         individuals regardless of business location or employee 
         residence
       Expands the Work opportunity Tax Credit from 35 percent for 
     the first $6,000 in wages for a targeted economically 
     disadvantaged employee to, 35 percent for the first $12,000 
     in wages.
       Expanding the credit will provide a greater incentive for 
     businesses, no matter where they are located, to hire 
     economically disadvantaged individuals; and will reduce the 
     rapid turnover of economically disadvantaged employees in 
     order for businesses to take maximum advantage of the credit.
       Expands the list of individuals who qualify for the Work 
     Opportunity Tax Credit to include individuals who have been 
     chronically unemployable.
       The current Work Opportunity Tax Credit is available to 
     residents within Economic Zones and Enterprise Communities; 
     Recipients of AFDC; Vocational Rehabilitation recipients; and 
     Summer Youth. The bill expands the list to include 
     individuals who have been chronically unemployed, have few 
     assets and have been living for a period of time under the 
     poverty level.
     III. Alternative flat tax for firms located in blighted areas 
         which hire local residents
       Authorizes businesses within enterprise Zones ad Enterprise 
     Communities to replace their current tax liability with a 10-
     percent flat tax option if 50 percent of their employees 
     reside within the zone.
       A low flat tax can be a powerful incentive for businesses 
     to locate within economically distressed areas, and to hire 
     residents of those communities.
     IV. Investor incentives to attract capital for firms located 
         in blighted areas
       Makes stock dividends from businesses within Enterprise 
     Zones and Economic Communities non-taxable.
       Tax free dividends will spur capital formation for 
     businesses which locate in economically distressed 
     communities and employ residents of high unemployment areas.
     V. Contracting set-asides for business who hire and train 
         economically disadvantaged individuals
       Transforms the SBA (8)(a) set-aside program from one that 
     provides federal contracting set-asides to businesses based 
     on the race or ethnicity of the owner, to one based on the 
     economic disadvantage of the business' employees.
       Providing set-aside contracts to businesses located within 
     EZ and EC's or which hire economically disadvantaged people 
     will enable the federal government to utilize its purchasing 
     power to help a greater number of needy people in a more fair 
     and racially blind manner.
       EDI's are defined as: (1) individuals who live within EZ's 
     or EC's, or (2) Individuals who have assets no greater than 
     the ceiling allowed for AFDC eligibility; who were not 
     claimed as a dependent for four years preceding the date of 
     their hiring; and whose income did not exceed the poverty 
     level in the year before their hiring nor in three of the 
     four years before their hiring, or (3) Individuals with a 
     dependent; who have assets no greater than the ceiling 
     allowed for AFDC eligibility; who were not claimed as a 
     dependent for four years preceding the date of their hiring; 
     and whose income did not exceed the poverty level during the 
     year prior to their hiring. Once designated as an EDI for 
     purposes of this program an individual retains the EDI 
     designation for a period of five years.
     VI. Business ownership mentor program
       Establishes a mentor program under the SBA to pair 
     businesses owned by economically disadvantaged individuals 
     with mentor businesses and lending institutions.
       Pairing start-up enterprises owned by individuals who live 
     within poverty stricken areas with mentor businesses will 
     enhance the success of first time business owners.


            title ii--utilities, schools and infrastructure

       Successful and sustainable community development depends 
     upon healthy infrastructure and public works including 
     transportation, utilities, schools and other public 
     accommodations. Lowering the cost of constructing and 
     operating public facilities and providing additional 
     resources to poverty stricken communities is vital to 
     improving the quality of life within these areas.
       Repeals Davis-Bacon within Enterprise Zones and Enterprise 
     Communities.
       The Davis-Bacon Act requires the payment of prevailing 
     union wages for any contract or subcontract which utilizes 
     federal funding. The rule inflates the cost of public 
     facilities and disproportionately impacts poverty stricken 
     communities which have fewer resources.
       Channels a greater share of federal Community Development 
     Block Grant monies to the neediest counties and cities.
       The federal CDBG program was created to assist communities 
     with economic and community development project. Currently, 
     70 percent of these grant monies are to be channeled to 
     disadvantaged communities. The bill increases the amount to 
     75 percent and cuts the percentage allowed for administrative 
     overhead from 20 to 10 percent and calls on wealthier 
     communities to cost share CDBG grants so that more dollars 
     can flow to bricks and mortar projects in needy areas.


                     title iii--educational choice

       Quality education is the key to improving the lives of our 
     youth and helping to break the cycle of poverty.
       Authorizes a federal school voucher program within 
     enterprise zones and enterprise communities.
       Empowering parents to send their children to the schools 
     that best meet their needs will increase and improve the 
     educational opportunity of Americans who reside within 
     blighted communities. Educational quality will dramatically 
     improve with competition. The bill would authorize voucher 
     payments to families within EZ and EC and would not redirect 
     or diminish the local funding of area schools.


                         title iv--safe streets

       The gravest threat to quality of life and community 
     redevelopment within blighted areas is violent crime. The 
     streets must be made safer and victims must be treated 
     compassionately and justly.
       Allows counties and cities which have a high rate of 
     violent crime to retain a higher share of federal asset 
     forfeiture proceeds under the Racketeer Influence Corrupt 
     Organization (RICO) statutes.
       Current law allows local law enforcement agencies which 
     participate in a federal asset seizure to a percentage of the 
     asset proceeds. The percentage reflects the level of 
     participation by the local agency. The bill allows an 
     additional 20 percent of the asset proceed to go to 
     communities that are disproportionately affected by violent 
     crime.
       Authorizes mandatory restitution for certain violent 
     crimes, and increases the federal Crime Victim Fund by 
     increasing fines against federal felons.
       Current law does not mandate that violent criminal 
     compensate their victims.


                      title vi--family opportunity

       The family unit is the foundation of our society. A loving 
     and supportive family is the key to a child's development 
     into a healthy and productive member of the community.
       Prohibits racial discrimination in adoption which deprives 
     millions of children from the opportunity to have a family.
       Many adoption agencies make adoption decisions based on 
     racial consideration. Consequently countless children, many 
     of them minorities from the inner city remain in foster care, 
     denied the opportunity for permanent family placement.


                         title vii--voluntarism

       America has a proud tradition of neighbor helping neighbor 
     which must be nurtured and sustained if we are to revitalize 
     America's communities, particularly those poverty stricken 
     areas most in need of a helping hand.
       Encourages states to pass laws protecting volunteers 
     against lawsuits.
       It's fundamentally unfair that we continue to subject 
     volunteers to the threat of liability when they share their 
     time, resources and expertise to help the community. The 
     exposure to liability in our increasingly litigious society 
     will chill voluntarism to the detriment of all 
     communities.
                                 ______