In the Fray: White House Plan On Dividends Needs Renovation
Washington -- The much-feared Law of Unintended Consequences is alive and well in Washington, as evidenced by the fact that Congress is about to consider a White House economic plan that could compromise one of the nation's most effective community revitalization tools and put some of the most vulnerable members of our society at risk.</br></br>Currently, the federal Historic Preservation Tax Credit (HPTC) offers a significant tax break for the rehabilitation of income-producing historic buildings. Another program, the Low-Income Housing Tax Credit (LIHTC), provides a similar incentive for the creation of affordable housing. These two credits are often combined to leverage private-sector investment in projects that create affordable places to live.</br></br>HPTC alone has sparked the renovation of more than 27,000 buildings and generated more than $18 billion of investment in the future of America's communities. Statistics show that in terms of job creation, increased household income and retail sales, $1 million spent on rehabilitation offers more benefits to a community than does the same amount invested in new construction -- and rehabilitation is exactly what the credit encourages. What's more, HPTC has spurred the creation or reclamation of almost 225,000 housing units, including more than 30,000 new units for low-and moderate-income residents.</br></br>In terms of their impact, HPTC and LIHTC go far beyond the usual range of federal alphabet-soup laws. These credits help make historic rehab and low-income housing projects viable for profit-minded developers who might otherwise opt for less risky ventures. But they do something else as well -- something essential to the social and economic health of the nation: They put a roof over people's heads and bring new life to residential and commercial areas from coast to coast.</br></br>Despite the fact that they have helped stabilize neighborhoods, create businesses and jobs, and boost tax revenues in small towns and big cities alike, these incentives are in danger of being marginalized by the current White House proposal. By allowing shareholders to receive tax-free dividends only on corporate profits that are fully taxed, the Bush plan could force companies to make a choice: Take the tax credit, or forgo it to offer tax-free dividends that will make shareholders happy. Many companies are likely to choose the latter option -- and even those that remain willing to invest in tax-credit projects are likely to invest less.