Coburn Proposes Ending Tribal Tax Exempt Bonds, CDFI Funding, Tax Credits
Sen. Tom Coburn (R-Oklahoma) has proposed a $9 trillion deficit reduction plan that would eliminate a tax-exempt bond program that puts sovereign Indian nations on par with states and municipalities, and other economic initiatives that help foster economic development in indigenous communities.
Back in Black, Coburn’s 600-plus page report, was released in mid-July as President Obama and Congress were in the middle of an acrimonious battle over raising the debt ceiling and reducing the deficit. Among the hundreds of programs Coburn suggests slashing are the tax-exempt Tribal Economic Development Bond (TEDB) program that was included in the 2009 stimulus legislation, the Community Development Financial Institutions fund, which has helped dozens of low income trial communities with housing business funding, and its New Markets Tax Credit Program, which was established by Congress in 2000 to spur investments in businesses and real estate projects in low-income communities
The TEDB program authorized tribes to issue up to $2 billion in bonds for economic development purposes with a cap of $30 million for each individual tribe that was selected. The allocations were issued in two parts to a total of 140 tribal nations in September 2009 and February 2010. The nations used the tax exempt bonds for a wide variety of projects including low-income housing, refinancing, industrial, manufacturing, commercial, retail, health, tourism, educational and health facilities, land acquisitions, water, environmental and transportation infrastructure and more. ,
Coburn criticized the TEDB because “unlike previous tribal bonds, this provision does not require bonded projects to fulfill an ‘essential government function,’ and thus can be used for a wide variety of initiatives including tourism development, convention facilities, golf course, and marinas. The bonds are not always put to the best use,” Coburn said, citing Arizona’s Salt River Pima-Maricopa Indian Community construction of the new spring training facility for Major League Baseball’s Colorado Rockies and the Arizona Diamondbacks.
“Tribes contend the provision (the tax exempt bonds) brings them into parity with state and local government bond provisions,” Coburn argued. But Indian country advocates say that sovereign tribal nations should have parity with state and local governments. “Senator Coburn is a rare legislator in today’s toxic political environment in that he actually believes what he says like when he stated that ‘Grover Norquist is old news,’ said Tom Rodgers, Blackfeet founder of Carlyle Consulting. “While very few could dispute the fact of the absolute need not to listen to anything that one of Jack Abramoff’s best friends would say the senator is wrong when it comes to Native American tax policy. This tax provision simply allows Indian Country to do what state and local governments have been able to do for a very long period of time for its citizens. It allows us to build our dreams -- dreams of economic diversification so that we may educate our youth, house our disabled and heal our elderly.” Coburn estimates that eliminating the Tribal Economic Development Bond program could save $400 million over the next 10 years.
Coburn would eliminate he Community Development Financial Institution (CDFI) fund and its New Markets Tax Credit program, which provide financing and assistance to low income communities. The CDFI’s promote economic development and new businesses; provide housing and start up loans; teach financial literacy programs; and provide community development financial services in general. There are more than 1,000 CDFI’s in the country; as of last December 59 of them were Native-owned with additional 60 preparing for certification.
Coburn said they are irregularities among the non-Native DFI’s and the New Markets Tax Credit program.
“The biggest beneficiaries of the program have been some of the nation’s biggest financiers, including J.P. Morgan Chase, Goldman Sachs and U.S. Bancorp, which among others have collected at least $10 billion since 2003,” he said. He also said the tax breaks provided under the New Markets Tax Credit program have benefitted multimillion-dollar companies. He cited a Wachovia Bank subsidiary that between 2004 and 2009 got $521 million in tax credits, and an additional $204 million in tax credits that went to two divisions of Chase Bank.
Coburn estimates that eliminating CDFI fund, which would impose a kind of collective punishment on Native CDFI’s that have not abused the system, would yield a savings of $2.77 billion over the next 10 years.