There is a multi-billion dollar question with the Kemp-Garcia Urban Enterprise Zones proposal that has so far prevented congressional action on the measure. Will its substantial tax incentives to businesses stimulate a stampede of job-creating firms into economically depressed urban areas?
I say the answer is at least a partial "yes"--if improvements such as the six I envision are included in the bill.
First: I would offer the tax incentives only to small businesses. In our country today, nearly all new jobs come from small firms. There is just no point in inviting big new factories into the neighborhood if computers, robots and a few button- pushers operate the whole thing without needing much local manpower.
Second: I would grant no tax cuts to businesses moving into the zone from across the street or from across the city. Short-distance relocation would make no new jobs in the area, and it would probably lead to the deterioration of neighborhoods the businesses left behind.
Third: I would insist on coordination with, and expansion of, other urban programs. These enterprise zones should become a focus of a whole array of federal projects. Along with new businesses should come better housing, education, public transportation and health care ensured by funds from Washington.
Fourth: I would increase the percentage of CETA-eligible employees who must be hired. To benefit from such generous tax breaks, businesses should make an even greater effort to hire, train and promote the disadvantaged workers in our poor communities, especially our unemployed youths.
Fifth: I would provide "seed money" for business start-ups. Most new companies make no profits in their first years, so tax cuts would be of no help to them.
And finally, sixth: I would introduce some rigorous accountability. If the business is not hiring the unemployed--no tax break. If economic conditions in the zone do not start improving within, say, five years--no more tax cuts. If businesses get started in the zone and then move to the suburbs or the Sun Belt--heavy tax penalties. If the concept is not working, we should not wait 20 years, and forgo billions in tax revenues, before we admit--or possibly before we even know-- that it has been a bad idea.
Critics of the enterprise zone concept claim that it will merely offer tax windfalls to existing firms and offer no real hope for urban revitalization. I believe that an improved version of the Kemp-Garcia Bill, in conjunction with other well- financed and well-thought-out urban programs, can make our cities good places for business and, more important, better places for us to live.