THE WHITE HOUSE

Office of the Vice President

                    ADMINISTRATION'S TAX CUT PROPOSAL
                   DELIVERS BIG FOR CITIES AND COUNTIES

Today, Vice President Gore, along with a group of America's mayors and county officials, urged the Congress to adopt the major urban initiatives in the Administration's new tax cut proposal. These initiatives promote community development where it is most needed. They also are true to the spirit of the balanced budget agreement reached between the Congressional leadership and the Administration, while the House and Senate alternatives fall short.

The Clinton-Gore Administration's new tax cut proposal includes four major initiatives to help America's urban areas:

• Helps to clean up and redevelop Brownfields;
• Creates new Empowerment Zones and Enterprise Communities;
• Includes a special Welfare-to-Work Tax Credit; and
• Provides for a new Community Development Financial Institutions Tax Credit.

PRESIDENT CLINTON'S TAX CUT PROPOSAL GOES FARTHER FOR AMERICA'S URBAN AREAS THAN THE ALTERNATIVES. In the balanced budget agreement, the President and the Congressional leadership pledged to seek enactment of three tax initiatives from the Administration's FY 1998 budget which are critical to America's urban areas: a Brownfields tax incentive; new Empowerment Zones and Enterprise Communities (EZ/EC); and a special welfare-to-work tax credit.

• Unfortunately, the tax bills passed by the House and Senate do not live up to that pledge. Neither bill includes the President's Brownfields or EZ/EC proposals. And while the House legislation includes a scaled-back version of the welfare-to-work tax credit, the Senate bill omits it entirely.
• The President's tax cut proposal includes not only the Brownfields tax incentive, new Empowerment Zones and Enterprise Communities, and the welfare-to-work credit, but also a tax credit to encourage investment in the Community Development Financial Institutions that are helping to revitalize urban areas across the country.

Key Urban Initiatives Clinton Tax Plan House Tax Plan Senate Tax Plan

Brownfields X *

EZ/ECs X

Welfare-to-Work Credit X X**

CDFI Tax Credit X

• Available to a much smaller number of communities than under the President's proposal
  • Credit is reduced for the first year, relative to the President's proposal

PRESIDENT CLINTON'S NEW TAX CUT PLAN HELPS TO CLEAN UP AND REDEVELOP BROWNFIELDS. The Brownfields tax incentive included in the President's tax cut proposal would reduce the cost of cleaning up thousands of contaminated, abandoned sites in economically distressed areas by permitting clean-up costs to be immediately deducted for tax purposes, rather than requiring this spending to be written off over time. This would, in turn, encourage redevelopment of these areas. The Treasury Department estimates that this $2 billion tax incentive will, over seven years, leverage more than $10 billion for private sector cleanups nationwide, allowing redevelopment of 30,000 brownfields.

• This Proposal is a Major Priority for Many of America's Mayors. Chicago Mayor Richard Daley, writing recently on behalf of the U.S. Conference of Mayors, urged Ways and Means Chairman Archer to include the President's Brownfields proposal in the tax bill: "This is a high priority for communities across the nation and we stand united in urging you and other members of the House Ways and Means Committee to modify the tax bill to include the $2 billion brownfields tax incentive." [Letter to Chmn. Archer, 6/11/97]

THE PRESIDENT'S TAX CUT PLAN CREATES NEW EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES. Under the President's 1993 Empowerment Zones and Enterprise Communities initiative, participating communities develop a strategic plan to spur economic development, and they receive Federal tax benefits, social service grants and flexibility in use of Federal funds in order to put these plans into effect. The EZs and ECs are urban or rural areas with high poverty and unemployment rates.

• A Strong Start since 1994. The 105 communities selected as EZ/ECs in 1994 amassed over $8 billion in public-private commitments. In the six urban Empowerment Zones, the private sector has made or pledged $2 billion in new investments. However, many communities that were not designated as EZs or ECs in that first round lack the seed capital to begin revitalization efforts.
• A Second Round to Build on Our Successes. In response, the President proposes a second-round of EZs and ECs -- 15 urban and 5 rural EZs and 50 urban and 30 rural ECs. The new EZs and ECs will benefit from a different blend of tax credits than the first-round communities. For example, the EZs will be eligible for the Brownfields tax incentive, special expensing of business assets, and qualification for private-activity bonds.

THE PRESIDENT'S PLAN INCLUDES A SPECIAL WELFARE-TO-WORK TAX CREDIT. This provision gives employers an added incentive to hire long-term welfare recipients by providing a credit of 50% of the first $10,000 in annual wages paid to new hires who have received welfare for an extended period. The credit can be claimed for two years per worker, to encourage not only hiring but retention. Although the Congressional leadership pledged to seek a credit along these lines, the House bill includes only a scaled-back version, and the Senate bill omits it entirely.

THE PLAN ALSO PROVIDES FOR A NEW COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS TAX CREDIT. The President's CDFI Fund is helping to build a national network of community development financial institutions -- community development banks, venture capital funds, and credit unions -- by providing financial and technical assistance to these entities. CDFI dollars are creating jobs, rebuilding neighborhoods and restoring hope in communities from San Francisco to Boston, Louisville to Chicago.

• A Public-Private Partnership. The Fund represents a promising model for Federal government action -- investing in local private sector institutions, leveraging private sector resources (to the tune of ten times the initial investment) and generating economic growth in distressed areas.
• A New $100 Million Tax Credit to Encourage Investment in CDFIs. Investors in these institutions would be able to take a tax credit of up to 25% of their investment. This new credit, which should help leverage over $1 billion in private investment for distressed communities, is not included in either the House or Senate versions of the tax legislation.

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