Addendum to Economic Development--killing two birds with one stone

Another idea I have had is related to helping areas affected by poverty. It is a combination of a variety of bank type companies plus some other ideas that seem to work.

Remember in the Movie “It’s a Wonderful Life”, the company George owned was a building and loan. Basically the people owned shares in the company that they borrowed from to build their houses. Imagine blending this idea with the modern credit union and add a dose of a mutual insurance company. Make the main goal to help locals create their own businesses. The basic idea behind this is the best way out of poverty is to create wealth or create ways to develop own sources of income.

There is an organization called NACA and I am sorry I do not remember what the initials stand for, but their primary purpose is to help people own a home. They do not just lend money though, they help people work through a program so by the time they purchase the house they have a sound financial foundation.

My idea then is to create an institution ( and new regulations may be needed unfortunately) that caters to small businesses and offers savings to people in targeted neighborhoods. They would not loan money to people to start a business, but would bring in experts in a variety of fields to help people establish a financial plan, marketing program etc so that once the business started it was set up to succeed. And this would be a for profit institution allowing the people in the neighborhood to be part of the institution combining the building and loan concept with the credit union. As the institution starts making loans and if done right they are set up to be successful, then the people/customers who would be able to own shares begin to see increase in their shares, ie wealth building so to speak. This probably won’t be large wealth, but they own something with value in two ways. It creates a savings portal for them along with the increase in share value, plus they are contributing to enhancing the neighborhood because overtime these small businesses have the chance to grow, add jobs, bring in new money to the neighborhood, and the owners develop a keen sense of who they are and what they can contribute to themselves and the neighborhood.

The institution helps the potential business owner through a variety of steps long before the business opens the door. The first few years of a new institution being introduced into the neighborhood would not be highly profitable and outside investors would be limited and must contribute more than just money to the start up. Overtime the idea would be for the local residents to share in the growth and as stated above begin to build savings and wealth. This would be a very productive way to really fight the war against poverty versus spending tax dollars just trying to feed people for a day.

And possibly could start to rid one of the worst financial businesses out there, the payday loan companies, which take a bad situation for someone and make it ten times worse.

Another benefit goes to the original investors and people who lend their time and talent to help the start up companies begin. You want this to be a for profit institution, but must plan on long term strategies so their must be rules about how you can invest in these institutions. The original investors get tax breaks upfront and even tax breaks when they sell so the locals can buy in. The people who lend their talents could get tax breaks in other ways.

I want to mention this thought first as the precursor to how the second group gets tax breaks. I think we need to restructure the tax code for retirees. Since we pay tax dollars into social security it really shouldn’t be taxed as income even if the retiree has a job or other income. There are certain rules when social security income can be taxed, but all taxes for SSI should be eliminated. Next many retirees fall into two separate groups, some that got by in life and need a job while retired and those that did well either as small or mediums size business owners or those that saved well from probably a professional job. I am not talking about large family wealth or the so called 1% level of being rich. They have their own tax situations that are not part of who I am trying to help in this situation.

Basically many of the group that was successful (upper middle class) still pay some taxes on their retirement income. Now since they were professionals or business owners these would be the people who might have the time and talent to lend to this new institution. They can either claim a tax credit for time given to the institution (and yes we would need to create a checks and balance system to make sure they truly contribute to get their tax break) or if they represent management or board members and contribute they could get a tax break on earned income for the specific earnings from the institution. This allows retired people who still want to contribute an avenue to help without burdening them with new taxes or it reduces their taxes lets say from retirement income such as IRAs or 401ks etc. And finally for those retirees who need the extra income, they can have a part time job in the institution and pay no taxes on this income up to a certain amount. The idea being we want people to contribute to the growth of neighborhoods in decline and also receive benefit for their efforts. This works to the philosophy of helping people become self sufficient which should be the goal of any anti poverty program.

The government is not the owner of these institutions, but the people. Again working to use government to create the avenues to fight the problem, but not burden society with excessive taxes or instituting programs that just drag on and do not solve the problem. Which is what I was hopefully stating was the big problem with the current war on poverty programs the federal government administers.

Another idea that can be made practical to solve problems and gives the reader a sense of what a progressive conservative idea can accomplish.

Next up: Education and final thoughts