President Trump’s signature campaign slogan pledged to “Make America Great Again.” Much of his political support originated in rural areas in which Mr. Trump vowed to reverse trends that feature eroded traditional economic bases, high unemployment and poverty rates, lower access to educational and training resources, and lagging physical and technological infrastructures. Moreover, in the recovery phase from the Great Recession, the lion’s share of private investment has targeted economic activities located principally in urban enclaves, retarding growth in rural America and exacerbating a widening gulf in the relative welfare of urban and rural populations. The state of Oregon has experienced its share of hardships similar to those across much of the rest of the nation. Although the economy of the state has generally succeeded in transitioning from its historical reliance on extractive industries—principally timber and fishing—many small towns have struggled in the wake of this shift. Fresh and deliberate public policy approaches are needed.
President Trump's centerpiece legislative measure—the Tax Cuts and Jobs Act of 2017 (TCJA)—has been examined and roundly criticized for its bias in bestowing massive taxation benefits to corporations and wealthy individuals in hopes of producing unproven “trickle down” economic benefits for the entire population. However, certain features of the TCJA that have not attracted much fanfare show promise as viable tools that could be employed in meaningful rural revitalization efforts.
This paper will focus on two case study employments of policy vehicles in struggling rural Oregon communities—approaches that represent innovative utilization of tax laws for stimulating economic growth and diversity. Both policy applications will be examined through empirical examination of their effects based on: (1) efficacy, (2) efficiency, (3) administrative costs/complexity, (4) equity, and (5) revenue loss.
The first of these policy applications I call the “directed investment approach,” which utilizes a combination of federal and state subsidies channeled through private third-parties to revitalize key industries in economically distressed areas. The focus of this example is John Day and surrounding Grant County, an area in which timber is still the dominant industry, but which has featured the second-lowest median income in the state of Oregon. Opportunity credits funneled through the non-profit organization Ecotrust are being used to partner with local businesses to renovate and diversify processes and develop best management practices to bolster economic performance and development in environmentally responsible ways.
The second policy prong I label the “Main Street Support” approach. The setting for this example is the small timber town of Dora, located in the Coast Range in Coos County. Here, a combination of loans (interest excluded to the donors) and grants (from both the state and non-profit groups) have been utilized to revitalize the economy of the downtown area. The idea is to plant the seeds that lead to fresh enterprise development from the ground up. The small business tax deduction, new 100% expensing rules, and lower income tax rates accompanying the TCJA provide the stimulus here.
