Academic journal article The University of Memphis Law Review

Can Free Enterprise Cure Urban Ills?: Lost Opportunities for Business Development in Urban, Low-Income Communities through the New Markets Tax Credit Program

Academic journal article The University of Memphis Law Review

Can Free Enterprise Cure Urban Ills?: Lost Opportunities for Business Development in Urban, Low-Income Communities through the New Markets Tax Credit Program

Article excerpt

"[The New Markets Initiative] is free enterprise. It's using the tax system to prove that the [free] enterprise system can work in every community in America. "x

INTRODUCTION

The tradition of entrepreneurship in the African-American community has a long and significant history. At one time, businesses owned by residents served as cornerstones in the community structure. Today, black-owned enterprises are "among the fastest-growing segments of our economy."2 Many minorityowned businesses, however, struggle to flourish in urban, lowincome communities, even as these communities receive lifegiving transfusions from business development programs, such as me New Markets Tax Credit Program.3 While the New Markets Program has succeeded in bringing economic development to many urban and rural areas, it has missed the opportunity to significantly invest in minority-owned businesses in low-income urban communities.

I grew up in Cleveland, Ohio and I have very fond memories of my neighborhood. We lived in the "city proper," in a well-kept residential community that was bordered by a thriving commercial area. As I recall, we did not have to look outside our community to obtain most of the things we needed. The pharmacy, dry cleaner, beauty shop, "five-and-dime store," our church, and even die funeral home were all nearby. And almost all of those enterprises were black-owned. The same held true for most communities near mine. People felt a sense of pride that they could patronize a local black-owned business and know that their money contributed to die well-being of their community.

When I go back to my old neighborhood, I see that most of the residents still maintain well-kept homes and manicured lawns, and the commercial area is trying to survive. Other communities, however, struggle to move beyond a state of despair. Until recently, one such neighborhood, the Central area, was best known for drug dealing and run-down public housing. That area, along with several other neighborhoods, suffered greatly as a result of the civil rights riots in the mid-1960s. The Cleveland Race Riots, or Hough Riots, left much of the Central area in a hopeless state, with plywood replacing welcoming windows in storefronts and, eventually, with liquor stores and check-cashing shops holding business where several small, African-American owned retail shops once stood. Until recently, Central area residents did not even have a nearby grocery store.

Amid an American free enterprise economic system that has created one of the wealthiest and most productive societies in the world today, one wonders what opportunities exist for communities like Central. In a time when U.S. companies are flooding to invest in India, Latin America, and China, what chance do the bypassed low-income communities in this country have? One wonders what it will take for urban, minority communities that face double-digit unemployment, high crime, failing schools, and otiier indices of poverty to re-enter into the economic mainstream. As a rule, private-sector investment, a critical component to economic development, has long lagged in poor urban areas. Traditional, public-sector participation has been largely under-funded and misdirected. Effective urban revitalization will require combining private and public, social and economic strategies, as well as recognizing that private investment in business development is absolutely essential to renewing poor communities. Yet, to be fully successful, business development in low-income minority areas must include significant investment in minority-owned businesses.

The New Markets Tax Credit Program, originally authorized by Congress in December 2000, represents the latest effort in the trend to use tax policy to stimulate economic development in distressed urban and rural communities. The New Markets Program permits investors to invest in qualified businesses in low-income communities through designated private entities. …

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