[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                     FIELD HEARING ON CREATING MORE
                   OPPORTUNITY AND PROSPERITY IN THE
                               RUST BELT

=======================================================================

                                HEARING

                               BEFORE THE

                          SUBCOMMITTEE ON TAX

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 20, 2024

                               __________

                          Serial No. 118-TAX04

                               __________

         Printed for the use of the Committee on Ways and Means
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
56-471                    WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------    

                      COMMITTEE ON WAYS AND MEANS

                    JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida               RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska               LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania             MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona            JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois               EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio                  BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas               DANNY DAVIS, Illinois
DREW FERGUSON, Georgia               LINDA SANCHEZ, California
RON ESTES, Kansas                    TERRI SEWELL, Alabama
LLOYD SMUCKER, Pennsylvania          SUZAN DelBENE, Washington
KEVIN HERN, Oklahoma                 JUDY CHU, California
CAROL MILLER, West Virginia          GWEN MOORE, Wisconsin
GREG MURPHY, North Carolina          DAN KILDEE, Michigan
DAVID KUSTOFF, Tennessee             DON BEYER, Virginia
BRIAN FITZPATRICK, Pennsylvania      DWIGHT EVANS, Pennsylvania
GREG STEUBE, Florida                 BRAD SCHNEIDER, Illinois
CLAUDIA TENNEY, New York             JIMMY PANETTA, California
MICHELLE FISCHBACH, Minnesota        JIMMY GOMEZ, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio
                       Mark Roman, Staff Director
                 Brandon Casey, Minority Chief Counsel
                             
                             ------                                

                          SUBCOMMITTEE ON TAX

                   MIKE KELLY, Pennsylvania, Chairman
DAVID SCHWEIKERT, Arizona            MIKE THOMPSON, California
JODEY ARRINGTON, Texas               LLOYD DOGGETT, Texas
DREW FERGUSON, Georgia               JOHN LARSON, Connecticut
KEVIN HERN, Oklahoma                 LINDA SANCHEZ, California
RON ESTES, Kansas                    SUZAN DelBENE, Washington
LLOYD SMUCKER, Pennsylvania          GWEN MOORE, Wisconsin
DAVID KUSTOFF, Tennessee             BRAD SCHNEIDER, Illinois
BETH VAN DUYNE, Texas                JIMMY GOMEZ, California
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
                         
                         
                         C  O  N  T  E  N  T  S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Mike Kelly, Pennsylvania, Chairman..........................     1
Hon. Gwen Moore, Wisconsin, Ranking Member.......................     3
Advisory of May 20, 2024 announcing the hearing..................     V

                               WITNESSES

Drew Whiting, CEO, Erie Downtown Development Corporation.........     6
Shafron ``Shay'' Hawkins, President and CEO, Opportunity
  Funds Association..............................................    15
Jason Spore, Owner, Ippa Pizza Napoletana........................    20
Tom Tredway, President, Erie Molded Packaging....................    24

                    MEMBER QUESTIONS FOR THE RECORD

Member Questions for the Record and Responses from Drew Whiting, 
  CEO, Erie Downtown Development Corporation.....................    50
Member Questions for the Record and Responses from Shafron 
  ``Shay''
  Hawkins, President and CEO, Opportunity Funds Association......    53

                    LOCAL SUBMISSIONS FOR THE RECORD

Local Submissions................................................    55

                   PUBLIC SUBMISSIONS FOR THE RECORD

Public Submissions...............................................    64

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


 
   CREATING MORE OPPORTUNITY AND PROSPERITY IN THE AMERICAN RUST BELT

                              ----------                              


                          MONDAY, MAY 20, 2024

                  House of Representatives,
                               Subcommittee on Tax,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 3:59 p.m., at 
Warner Theatre, 811 State Street, Erie, Pennsylvania, Hon. 
Michael Kelly [Chairman of the Subcommittee] presiding.
    Chairman KELLY. Welcome to the Ways and Means Subcommittee 
Field Hearing on Opportunity Zones, Tax Cuts and Jobs Act, and 
the Subcommittee will please come to order.
    Welcome to Erie, Pennsylvania. And I say this to my 
colleagues who are up here at the desk; I don't think they 
expected to see this type of a turnout. This is incredible. So 
I see Senator Laffa (?). We're used to this type of turnout 
anytime we get together, right? Brad. Everybody's here with us.
    So listen, our team is very excited to have you here today 
for the Field Hearing on the success story of Erie's 
Opportunity Zone and how this Committee can create 
opportunities for Erie--in areas such as Erie to thrive in the 
Rust Belt and throughout the country.
    Thank you, Chairman Smith, and your team, for all your hard 
work that you've done these last few months to bring this 
committee to western Pennsylvania. I also want to take a moment 
to thank all those in this community who have helped my team 
and I make this event such a success. Without your efforts, 
none of this could be done. You're all the epitome of what 
makes Erie thrive, and we are here today because of your 
dedication to protecting and revitalizing this community.
    For those of you unfamiliar with Erie, Erie residents are 
proud of their rich history. In the 1600s, the Eriez Indians 
first settled on the lake shore. The French later controlled 
the region, building a fort on Presque Isle, which they would 
later play a pivotal role in the War of 1812. Lake Erie served 
as a hub for the U.S. Navy's fleet. The Brigs Niagara and 
Lawrence helped secure victory in the 1813 Battle of Lake Erie. 
The reconstruction Oliver Hazard Perry's Flagship, the U.S. 
Brig Niagara sails in the Lake Erie off the Presque Isle Bay, 
is responsible for Erie's nickname, The Flagship City.
    Now, after the war and through the 1900s, Erie grew rapidly 
with busy rail lines and ports. Manufacturing jobs attracted 
waves of immigrants to the northwest corner of Pennsylvania. 
The population of Erie peaked in 1960 with 140,000 residents. 
Like many areas in the Rust Belt, Erie experienced a loss of 
good-paying manufacturing jobs and suffered perpetual 
population decline.
    Today, Erie's population sits at just around 90,000 people. 
The downtown zip code, 16501, became home to one of the poorest 
zip codes in the United States. But as I mentioned, Western 
Pennsylvanians are proud of our history and have deep pride in 
the area where we live, with many folks born and raised in 
these towns and choosing to raise the next generation right 
here in Erie, we have a vested interest in making our 
communities thrive like they did in our parents' and 
grandparents' generations.
    It was recently stated that Erie is a city with a can-do 
attitude, great work ethic and a true sense of community and 
family. Because of this, Erie community leaders came together 
to begin the revitalization efforts. With the help from key 
stakeholders and pivotal leaders of the community, the Erie 
Refocused plan took shape and the downtown--Erie Downtown 
Development Corporation began their work through property 
development in the summer of 2017. Major employers in Downtown 
Erie, including Mr. Tom Hagen with Erie Insurance, local 
universities and the city's top hospitals, partnered together 
to provide the initial funding to launch investment and 
development.
    Back in Washington, a bipartisan group of members, led by 
former representatives Pat Tiberi and Ron Kind, and Senators 
Tim Scott and Cory Booker, introduced the original Opportunity 
Zone legislation. This legislation, later added to the Tax Cuts 
and Jobs Act, had nearly 100 bipartisan sponsors, which is hard 
to do with the government we're in today. Opportunity Zones 
were designed to provide tax incentives that encourage long-
term private capital investment to revitalize low-income areas.
    The Opportunity Zone program was able to facilitate the 
type of investments that would best serve the community's 
needs. With the new Opportunity Zone legislation and Tax Cuts 
and Jobs act, investors turn to Erie. After years of work and 
leadership of the Erie Downtown Development Corporation and 
local stakeholders, Erie has welcomed 110 new residential 
spaces, created space for 25 new businesses, restored eight 
historic properties, revitalized over 100,000 sqft. of 
commercial space and established a grocery store in what was 
previously designated a food desert.
    Erie Downtown Development Corporation stakeholders have 
leveraged $40 million in private capital into a $115 million 
investment throughout the downtown area Opportunity Zone, but 
our work on Opportunity Zones is not yet finished.
    Now, I'm proud to lead the Opportunity Zones Transparency, 
Extension and Improvement Act with my colleagues, 
Representatives Dan Kildee, Carol Miller and Terri Sewell. This 
legislation strengthens the Opportunity Zones with reporting 
requirements along with expanding incentives to help those 
communities that need it most. Last year, the Ways and Means 
Committee passed the Small Business Jobs Act, which included 
these reporting requirements, as well as new Rural Opportunity 
Zone program that will revitalize struggling communities in our 
heartlands; a way to ensure cities and towns, regardless of 
their population, can benefit from this legislation.
    I look forward to working with others on these bills and 
other Opportunity Zone legislation as we hand into 2025. 
Additionally, we have seen on this Main Street in Downtown Erie 
that success extends to the businesses beyond downtown. 
Manufacturing has been a large part of Erie's history and 
employs 25 percent of this community. These jobs, especially 
those in family-owned businesses, are the backbone of this 
community.
    This is why the Ways and Means Committee have been 
committed to extending and expanding pro-growth tax policy, 
like immediate expensing for R&D and 100 percent bonus 
depreciation, so we can give companies the tools they need to 
invest in their factories, their equipment, and most 
importantly, their workers. This will allow for Americans to 
remain more competitive in the global economic economy and keep 
folks on the job right here at home.
    Finally, I'm happy to have this panel of witnesses with us 
today to testify on the success of Opportunity Zones. The 
impact in this community, as well as other tax provisions that 
impact the manufacturing industry in the Erie Community.
    Before I turn this over, I think that that too often people 
have talked about Erie in the past tense. And for those of us 
that are familiar with Erie, know we would never, ever, ever 
give up on who we are, what we are and who made us what we are. 
Opportunity Zones became something that we never expected to 
have happen. Yet, Erie embraced it right from the beginning and 
has turned itself around.
    This is an incredible tribute to this community, the people 
who live here, the people who work here, and the people who 
came here to begin with--to start a family and to have a strong 
community.
    Now I'm privileged to have with me several of our Members. 
And now it is my honor to recognize the General Lady from 
Wisconsin, Ms. Moore, for her opening statement. Ms. Moore.
    Ms. MOORE of Wisconsin. Thank you so very much, Mr. Kelly. 
Thank you for inviting us to this beautiful community; another 
great place on the Great Lake. I hail from Milwaukee, 
Wisconsin, and Mr. Hawkins, I don't think Cleveland is a 
mistake on the Lake. I do think that while we talk about this 
being the Rust Belt region, we should just reimagine it as 
we're doing here today, and call it the Fresh Coast. I think 
we're going to see a lot of immigration to this area because 
these Great Lakes are a great, hidden secret, not only to the 
United States, but to this world.
    I have enjoyed my visit here in Erie. I want to thank Mr. 
Whiting for having lunch with us today. I was listening, 
although my ears are not as good, to try to catch some of the 
other just subtle sort of nuances. I know that you have great 
testimony here today. And of course, Mr. Hawkins, nice to see 
you again. You're the power behind the throne. And just really 
want to congratulate Senator Scott and my own Senator, retired 
Representative Ron Kind, for introducing this and pushing us to 
this point where we can look at how to renew it and how to 
improve it. It's really obvious that it's hard to track the 
impact of Opportunity Zones, given the lack of reporting 
requirements and transparency by investors.
    That holds true in Milwaukee, Wisconsin, but I'm aware of 
some of the important investments that have occurred in my own 
district. I just hope you can hold on and I can share that with 
you. For example, the Good City Brewing Company was one of the 
first companies in the region to use the federal Opportunity 
Zone program, which attracted investors to bring cash into a 
deal in the facility in the Century City Business Park.
    The Century City Business Park is a 44,000 square foot 
empty space and a building that was the headquarters of the old 
A.O. Smith factory, which at one time employed 30,000 people 
who lived in, what is now, the inner city of Milwaukee. And 
then there was Talgo's railcar refurbishing facility, the 
second tenant. That was good news.
    Now, the Central City Business Park was in a real tough 
part of the neighborhood. The entire area is in dire need of 
rehabilitation. So, it wasn't a surprise to me that Milwaukee 
had to use public funds to kind of bail out the businesses, but 
that was only temporary. We can boast that the Century City 
Building, located on the Northwest side is 100 percent leased 
and occupied. Just last month, the Craft Beverage Warehouse 
announced that it's looking to develop a new facility in the 
business firm.
    That said, I'm also aware of the opportunity projects 
funded that I wondered whether they're the best use for funds 
for the community, such as some of the condo projects that 
catered to higher incomes.
    So, that's just a taste of what we're seeing in Milwaukee. 
To the witnesses here today, thank you for coming. I look 
forward to hearing more of your testimony. Now, Mr. Chairman, 
as we explore the Opportunity Zone it's important to be clear 
eyed about what we're talking about here. The tax benefit 
conferred on taxpayers who invest in qualified opportunity 
funds are tax benefits for the rich. Now, in fact, the Joint 
Committee on Taxation found that the average income for 
qualified opportunity fund investors, nearly $1.1 million a 
year.
    Now, I know that you can start rolling your eyes, 
especially the Chairman of the full committee and say, here we 
go again, these liberal democrats, about going on about tax 
cuts for the rich, but I'm going to surprise you here today, 
Chairman. I get it, that so many parts of the country, Erie 
being one of them, Mr. Hawkins, need capital and private 
investment.
    I can understand why we might need a program to encourage 
that kind of private investment in areas where the return on 
capital might not otherwise be so great. And even though I know 
people are looking for capital, and look for people who need 
money, you're not going to hear me say these are tax cuts for 
the rich.
    I don't have unlimited time. I'm just a Ranking Member 
here, but I just need to make one last point, Mr. Chairman, and 
that is that I think that we just need to work further to make 
sure that there's a connection between enriching the richest 
investors and making sure that there's a real solid public 
purpose for this funding, because this is being funded by 
taxpayers.
    And so I just want to say before I go, I got pages to go, 
but like Drake would say, and I'm the Ranking Member here 
today, so I take certain privileges and, you know, I sit on 
that lower--in D.C., but I'm like Drake, I started from the 
bottom and now I'm here. And I yield back.
    Chairman KELLY. Thank you, Ms. Moore. That's a pretty good 
testimony--good opening remarks. I will say this though, if I 
may. Because I remember when we were doing Opportunity Zones 
and one of the complaints was, you were only concerned about 
the wealthy people. And my answer to that was, well, they have 
the money to invest using the core tax dollars to invest where 
nobody else would invest, because it didn't look like a 
promising thing.
    We encouraged people to invest in their communities, to 
make a change in a community that had been forgotten, that 
pushed aside, and nobody was going into. This, by the way, was 
able to bring those folks to say, you know what, I will take a 
chance. I will invest in their, using not taxpayer funded 
revenues, but using private dollars.
    So with that, the Chairman of the Ways and Means Committee, 
Mr. Smith.
    Chairman SMITH. Thank you, Chairman Kelly. Let me first 
begin by thanking you for hosting us here in your beautiful 
city, and also to the Warner Theatre for hosting us today. 
Beautiful, beautiful. And I want to thank each and every one of 
you for coming out. I believe it's extremely important to go 
outside of Washington and see real America and see how we can 
make policy that benefits rural America, but also see policies 
that does not benefit real America.
    I'm also sure I speak for all who participated, how 
gratifying and informative today's tour of the Erie Opportunity 
Zones was in helping paint a fuller picture of the true value 
of the program. The Ways and Means Committee is in Erie, 
Pennsylvania, because it is home to a true American success 
story that was born out of the hard work of the local community 
and common sense economic policies.
    Erie was once home to the poorest zip codes in the nation, 
but that changed in part because of the 2017 Trump tax cuts 
that not only lowered the tax burden on low-income families and 
raised wages, but also made critical investments in the 
strength and vitality of local communities through the 
Opportunity Zone program established under the law. Opportunity 
Zones have sparked a flood of private investment in communities 
most in need of an economic boost, and in Erie, over $750 
million has flowed to support the local community.
    Again, those are private sector dollars, not federal funds. 
The Ways and Means Committee is working to build on the success 
of the Trump tax cuts, and that includes the Opportunity Zones 
program. In June of last year, the Committee approved the Small 
Business Jobs Act, legislation to incentivize investment in 
America's Main Street businesses to make it easier for them to 
grow and create jobs, while also expanding the Opportunity Zone 
program to incorporate more rural communities.
    A key piece of that legislation was authored by our Tax 
Subcommittee Chairman Kelly, and includes important reporting 
requirements to ensure Opportunity Zones are being set up in 
accordance with the law and delivering on the promise of the 
policy.
    At the Ways and Means Committee, we have made substantial 
progress towards supporting Main Street businesses that are 
building stronger communities. There is more to be done, a lot 
more to be done. We are in Erie to hear your thoughts about the 
importance of these tax provisions because it's clear President 
Biden isn't listening. President Biden has pledged to let the 
Trump tax cuts expire.
    We know what that means for local economies like Erie. 
Starting in 2026, the average family of four in Erie, earning 
just shy of $60,000 will see their taxes go up by over $1,200 
per year upon expiration of those 2017 tax cuts. We know the 
small businesses that are the engine of growth in our 
Opportunity Zones will face a top rate, well over 40 percent. 
The families who earn the paychecks, raise their families and 
help keep the stores open on Main street will see their child 
tax credit and their guaranteed tax deduction slashed in half.
    We cannot allow for the success that has taken hold in Erie 
in communities all across our country to be rolled back or 
abandoned by letting the tax policies that have done so much 
for so many expire. Members of this Committee are already 
working with our tax teams to protect families and small 
businesses from losing the Trump tax cuts next year. One of 
those tax teams, chaired by Representative Kelly, is the 
Community Development team, which will focus on how we can 
encourage and incentivize more main street investments, expand 
housing opportunities and support small communities so they can 
grow and meet the needs of families where they live and work. I 
want to thank the witnesses for taking time out of your busy 
schedule for being here today, and I also want to make sure 
that we have the opportunity to hear from everyone in the 
audience as well. There will be clipboards that you will see 
that will be passed out for everyone to share with us your 
concerns and ideas.
    We will enter into the official hearing record and take 
those back with us to Washington. So please get a clipboard, 
write down your information, and it will be submitted into the 
official record. It is a pleasure to be in Erie, Pennsylvania. 
And it's a pleasure to be with you, Mr. Chairman.
    Chairman KELLY. Thank you, Chairman. Now I'm going to 
introduce our witnesses, Mr. Drew Whiting, who is the CEO of 
the Erie Downtown Development Corporation. Shay Hawkins is 
President and CEO of Opportunity Funds Association. Jason Spore 
is Founder and Owner of Ippa Pizza (Napoletana). Tom Tredway is 
President of Erie Molded Packaging. First of all, thank you all 
for taking time out of your lives here with us today, because 
it's important for the community to actually hear the people 
who are on the ground working in these programs and how it 
works for you. So thank you for doing that today.
    Now, your written statements will be made part of the 
hearing record and each of you will have five minutes to 
deliver your opening oral remarks.
    Mr. Whiting, you may begin, please.

   STATEMENT OF DREW WHITING, CEO, ERIE DOWNTOWN DEVELOPMENT 
                          CORPORATION

    Mr. WHITING. Chairman, Ranking Members, it's a privilege to 
sit in front of you on behalf of the Erie Community and the 
Erie Downtown Development Corporation to thank you for 
providing a legislative catalyst that has changed the 
trajectory of our community for the better.
    The story of Erie over the last half century is familiar to 
anyone acquainted with the Greater Rust Belt region. A once-
proud manufacturing center of the Great Lakes with a thriving 
middle class became a shell of itself over several decades. 
Community decline, often measured and communicated in terms 
population loss and other traditional economic metrics, is 
actually felt through the despair and the eventual apathy of 
its citizenry. A little less than a decade ago, Erie's private 
sector leadership, determined to reverse course, began 
designing a place to shock our city back to life.
    Opportunity Zone legislation passed as part of the Tax Cuts 
and Jobs Act, provided our stakeholders a major tool necessary 
to attract investment required to execute on that plan. Today, 
we celebrate Erie as one of the best examples of OZ-enabled 
transformation, the beneficiary of federal economic development 
catalyst that has served as a model for many other communities 
across the country.
    In December of 2021, after living in Chicago for more than 
14 years, my wife and I moved Erie to be closer to family. Hers 
in Erie, mine in Buffalo. We were working remotely, had no real 
plans to be involved in this community, but after landing in 
town, that notion very quickly changed. It was less than a week 
before we met new friends at the EDDC's Flagship City Food 
Hall, joined Radius, a longstanding pioneering co-working 
community and were introduced to members of our business 
community.
    From the bay front to the tracks, I noticed scaffolding, 
cranes, announcements of new investments and projects 
throughout the community. More importantly, I could feel it. I 
could feel the buzz, the energy that can only be described as a 
feeling of optimism and hope about the direction of this 
community. That feeling led us to immerse ourselves in the 
community. Before we were here for even a year, we purchased an 
anchor building on State Street with the intent of contributing 
to the factor--to the fabric of our new home in a positive way. 
That renovation has been done through an Opportunity Zone fund.
    Now, as the CEO of Erie Downtown Development Corporation 
and as a fully-converted believer in the potential of this 
city, I've joined the deep ranks of Erie evangelists who tout 
our quality of life, reasonable cost of living, amenity-rich 
downtown and resources that we possess on our Bayfront and with 
Presque Isle State Park and beyond.
    While it's difficult to measure community pride, I can tell 
you that despite the hits this community has taken, that pride 
is coming back. Look behind me. A major reason for that is the 
forward progress that you all saw today, and that was enabled 
by your Opportunity Zone legislation. Established in 2016 to 
revitalize Erie, the Erie Downtown Development Corporation, 
under the leadership of private and local stakeholders and 
John----
    Chairman KELLY. Excuse me, the chart's over there because I 
think it's important to see the return on that investment.
    Mr. WHITING. Oh, Yeah. Spent $27 and-a-half million of 
equity investment in the Erie Downtown Equity Fund, which was 
leveraged to invest in $113 million of development over the 
next seven years. Phase One, as it's termed, nearing completion 
later this month, has resulted in development progress and 
attraction of external investment in a fraction of the 
anticipated timeframe, primarily because of the catalytic 
impact of opportunities on legislation.
    The chart you see over here says volumes. It's also 
important to note that beyond that, we've attracted over $100 
million of other investment into this town from people that are 
not from Erie, that have no connection to this place. Ms. 
Moore, we are happy to report the above to you at any time, and 
under a more stringent reporting regime, we're happy to do it 
in even more detail.
    Ms. MOORE of Wisconsin. And maybe closer up, too.
    Mr. WHITING. Maybe closer up.
    In addition to that, other development money that's come to 
town, we've also seen companies like Truck-Lite, Kyocera come 
into town. National Fuel make downtown their continued 
headquarters. They've decided to remain or move operations to 
Erie based on the positive progress we're making downtown and 
the way that progress is radiating outside of that.
    Because of the progress we've made in Erie, I received 
frequent visitors and calls from thought leaders in the 
economic development realm. Though each has its own approach, 
most convey some version of hey, you've done a great job, but 
do not stop here. You need to do more.
    As you can see behind me, with a room full of Erieites 
(sic) showing up to let you all know that we appreciate the 
work that you've done for us, we also want to let you know we 
are committed to doing more. We do not view our work as an 
effort that will last a decade. We expect we will be working 
for a generation or more to fully reverse several decades of 
decline. Thus, it's crucial that OZ benefits and other tax 
policy and expansion tools are continued so that we can 
progress as a region.
    Our story is not finished. We have plenty of work to do. We 
remain steadfast in our commitment to our mission. We've never 
been more motivated than we are today. Community pride in Erie 
is surging. A community now richer with hope and optimism for 
the future. Thank you for working in a bipartisan fashion to 
enable our work over this past decade and for many years to 
come.
    [The statement of Mr. Whiting follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman KELLY. Okay.
    Thank you. I appreciate it, Mr. Whiting. Now, we recognize 
Mr. Hawkins. Mr. Hawkins, you are now recognized. I will tap 
the mic when it gets down to where you're at 30 seconds left to 
go. As I know you all have a lot to say.
    I hate to shut everybody off because it's your day and it's 
our purpose of being here, to listen to you, but Mr. Hawkins, 
you are recognized five minutes.

   STATEMENT OF SHAFRON ``SHAY'' HAWKINS, PRESIDENT AND CEO, 
                 OPPORTUNITY FUNDS ASSOCIATION

    Mr. HAWKINS. Well, Chairman Kelly, Ranking Member Moore, 
Chairman Smith, thank you for having me today. This is my 7th 
time testifying before Congress, but my first time testifying 
before the Tax Subcommittee. So I really thank you and it's a 
special privilege for me to be testifying again in the 
heartland as I was born and currently reside just an hour and-
a-half west of here in Cleveland, Ohio. And I appreciate your 
comment, Representative Moore, that Cleveland is not a mistake 
on the Lake. It's part of that freshwater kingdom you 
described, and so we are--I really appreciate you allowing me 
to be a part of this.
    So I am Co-Founder and President of the Opportunity Funds 
Association, a trade association whose members are 
entrepreneurs, investors, developers and fund managers 
operating in Opportunity Zones. Opportunity Zones are arguably 
the most successful community development policy in American 
history. So this afternoon, I would like to discuss how 
Opportunity Zones are targeting private investment in areas of 
the country that have been de industrialized, and how tax 
policy can be used to build domestic supply chains, incur free 
investment, and renew prosperity in places like Erie, but also 
in the often overlooked rural communities across this nation.
    And so, you know, prior to Cofounding OFA, I served as 
majority staff director the Senate Finance Subcommittee on 
Energy, Natural Resources and Infrastructure, and as tax 
counsel to Senator Tim Scott, where I helped champion the 
Investing and Opportunity Act, which became opportunity 
centers. Analysis from the Economic Innovation Group, using 
data from recent studies at UC Berkeley and our Treasury 
Department, found that by 2020, OZ had already achieved 
unprecedented geographic reach and scale.
    So just two and-a-half years after zone designation, nearly 
half--again, half, or roughly 3,800 communities across every 
state that receive investment, with those investments being 
among the highest-need communities in the U.S. And so how can 
Congress help to reinvigorate and bring prosperity to 
heartland?
    Well, first of all, we need to urge President Biden to 
abandon plans for any tax increases. Working families are 
already seeing tightening budgets and higher prices. Over the 
past few years, our consumer prices have risen 19 percent. 
Forty percent for electricity, 30 percent for gasoline, 46 
percent for car insurance, 51 percent and 30 percent--I'm 
sorry, 30 percent for baby food. And so adding to this, the Tax 
Foundation estimates that we would lose 788,000 full-time jobs 
and 2.2 percent of GDP if the President's fiscal year 2025 
budget were enacted in his proposed budget.
    And so, you know, first do no harm. In terms of Opportunity 
Zones, as Representative Moore indicated, it is critical, and 
perhaps the most important step that Congress can take to 
optimize sustainable growth and Opportunity Zones, we need to 
pass a bill adding reporting and transparency requirements, 
such as those found in the Small Business Jobs Act and those 
largely mirrored in Chairman Smith's opportunity Zone 
Transparency Expansion and Improvement Act. And so that is 
critical.
    We also need to jumpstart our rural investment by allowing 
for intermediary investments in what are called feeder funds, 
which will enable more investment from smaller, more qualified 
opportunity funds in a fund to funds model that will enable 
smaller, regionally focused, impact-oriented funds that are 
more likely to invest in rural areas and also solve the problem 
that Representative Moore noted, with only large investors 
being involved in the process.
    So we can solve that today. And lastly, we need to enact 
legislation, as my fellow witness noted, to extend this great 
policy. With that transparency reporting information will be 
able to better understand how Opportunity Zones are performing, 
and then you and Congress can tweak that to make this great 
policy even more effective. So I appreciate you having me 
today, and I look forward to hearing from my fellow witnesses 
and my discussion with you all.
    [The statement of Mr. Hawkins follows:]
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    Chairman KELLY. Thank you, Mr. Hawkins.
    Mr. Spore, you're now recognized for five minutes.

    STATEMENT OF JASON SPORE, FOUNDER AND OWNER, IPPA PIZZA 
                           NAPOLETANA

    Mr. SPORE. I'd like to start today by thanking Subcommittee 
Chairman Kelly, Ranking Member Moore, Chairman Smith, and 
Members of the Ways and needs committee for allowing me the 
opportunity to comment today on the impact the Opportunity Zone 
in Erie, Pennsylvania. The policies that shape it and the 
investments made by organizations who invest have had on my 
business.
    Ippa Pizza Napoletana was established in 2022 as a food 
truck with the central commissary about a mile and-half down 
the road. I set off on this venture with the hopes and dreams 
of creating some of the best pizza in the region; the nation 
really. Like any business first starting out, I had big goals. 
I have a mission, vision, values. Those all serve as my 
guideposts. Ultimately, I wanted to build something that my 
family could be proud of and that the Erie community could be 
proud of. I have a goal of supporting the local economy with 
purchase of my raw goods. More important is to build a culture 
inside of my organization where individuals who maybe didn't 
get the best start in life would find a place to work that 
would teach self-worth, leadership and growth both personally 
and professionally.
    What started out as a dream in college when my mom actually 
laughed at me when I asked her to teach me how to make dough 
over the phone, turned into an obsession. So where did the name 
Ippa come from? It came from my son Colby when he was 18 months 
old and learning how to talk. That's what he said. That's the 
way that he said pizza. He'd reach for this guy and say, ippa, 
ippa, reaching for another slice. He's truly a boy after my own 
heart.
    So I learned to make authentic Neapolitan pizza from a 
world champion pizzaiolo, or pizza maker, who runs two of the 
most acclaimed pizza restaurants in New York City. I took these 
learnings and I built a product serving naturally-fermented 
dough made in part from locally sourced wheat from Pittsburgh. 
We source garlic and heirloom tomatoes and cheese curd from 
local and regional farmers and producers when in season. We 
compost our organic scraps with a local company and donate the 
fresh compost back to farmers who then again regrow our 
vegetables. All this is done not because it's easy or cheap, 
but because it results in a better product.
    We feel an immense sense of pride being one of the largest 
customers of each of these other small businesses and 
contributing to local supply chains. If we can be a part of 
another business's success story, it's a good thing, and JFK 
once said, a rising tide lifts all boats.
    Like any small business, we faced challenges early. 
Specifically, we needed more employees and marketing. As almost 
a 50-year old trying to learn the intricacies of today's social 
media, you'll find out real quick why marketing is a four-year 
degree. I was also working and continued to work full time, so 
time management and allocation of resources had to be more 
efficient. We learned limitations that existed in our current 
operation. We knew that if were to become viable, we needed to 
transition into a brick and mortar operation as soon as 
possible. In short, we needed help.
    Upon all these realizations, I simultaneously learned of a 
potential opening in the Flagship City Food Hall, right in the 
middle Erie, PA's Opportunity Zone. I began to understand what 
an Opportunity Zone was and how the investments made were truly 
a win, win, win for the businesses that invest in these 
depressed areas. The new business owners who touch the 
customers directly, like myself, and most important, the 
greater community that ultimately becomes a vibrant place to 
live, work and play.
    The companies who invest, like Erie Insurance, UPMC, 
Gannon, Mercyhurst, Plastek, the Erie Community Foundation, AHN 
and Highmark, the Hagen family and all the local banks; they 
get deferred tax benefits. They get breaks on capital gains, 
tax breaks on capital gains, but it's not about that. What do 
they give? They give the citizens of Erie a new beginning, 
options to work, play and shop. They give the opportunity to 
make the community in which they choose to operate, great. They 
provide revitalization and make people want to work and live 
here, raise their families, visit on a vacation. And they give 
the opportunity for people like me to live the American dream.
    Ippa Pizza Napoletana relocated to 22 North Park Row in 
January of 2024. Remember when I said we needed help? The 
professionalism and guidance by Drew Whiting, the President of 
the EDDC. Corey Cook in the back there, he's the Director of 
Operations. Mark Inscho, Director of Food and Beverage. Paula 
Gregory, the Controller, were invaluable and just what we 
needed through this transition. What about marketing? The help 
afforded by Ryan Hoover, the experienced director, was one of 
the biggest surprises. When Ryan's in the building, our 
business gets highlighted to the Greater Erie community, and we 
make money, which is the lifeblood of everything we're talking 
about today.
    What about access to motivated employees and other business 
owners? Because of the groundwork laid several years ago, a 
transplant to Erie like me was able to grow fast and I'm proud 
to say that we now employ 12 employees, where we ran for a year 
and-a-half with only three, and we're still hiring. At Ippa, 
our story is just getting started.
    So what happens if the tax provisions afforded investors in 
Opportunity Zones expire with no legislative action? I hope 
I've shown you what happens when this legislation is 
understood, appreciated and acted upon. Everyone in this room 
understands where we were in this community. 16501, one of the 
poorest zip codes in the United States.
    A mentor of mine, Uncle B. once said, don't just come to me 
with a problem, bring a solution. One of the poorest zip codes. 
That's our past. Walk across the street and see the progress. 
You've heard the goals and the dreams and you see the action. 
And I'm not the only one. We're living the solution. With your 
help, we are fixing it. It's a win, win, win. Let's not go 
backwards. Take action. We will make Erie great.
    Thank you for your time.
    [The statement of Mr. Spore follows:]
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    Chairman KELLY. Thank you, Mr. Spore.
    Mr. Tredway, you are now recognized.

   STATEMENT OF TOM TREDWAY, PRESIDENT, ERIE MOLDED PACKAGING

    Mr. TREDWAY. Good afternoon, Chairman Smith, Chairman 
Kelly, Ranking Member Moore, and members of the Committee. My 
name is Tom Tredway. I'm President of Erie Molded Packaging, 
privately held family-owned manufacturer, founded right here in 
Erie, Pennsylvania. I appreciate the opportunity to discuss 
critical tax provisions with you today and welcome you to the 
Keystone State.
    For more than 40 years, Erie Molded has been creating 
custom injection molding parts and integrated packaging 
solutions customers all over the country. My father, who was 
also an Erie native, had the desire to contribute to 
Pennsylvania's manufacturing sector. After running a successful 
string of businesses on the west coast in the seventies. He 
founded the company here in 1982 and has been a pillar of our 
community ever since.
    For those visiting our state who might not be familiar with 
Pennsylvania's iconic architecture, our state nickname is 
essential to who we are as people; a keystone is in the center 
of an arch that holds the other stones in place. It is the 
strongest and most critical part of the structure and once you 
know what--excuse me. And once you know what they are, you will 
surely recognize the symbol across the state. The stone 
reflects Pennsylvania's historic and political importance in 
America's early years. The U.S. tax code also functions as a 
keystone for our great nation.
    Manufacturers across the country face unique challenges 
every day. When our keystone is strong, such as having pro-
growth tax code, we're able to build something great. However, 
beginning in 2022, our tax code began to develop cracks, 
weakening the entire structure. Tax provisions that had either 
been in the Code for decades or enacted as part of the 2017 tax 
reform, began expiring in 2022. And there are more damaging 
changes on the way next year. A weakened tax code, severe 
worker shortages, supply chain disruption, and competition from 
abroad have significantly impacted Pennsylvania's manufacturing 
community.
    I want to thank all the members on the subcommittee who 
supported the tax relief for American Families and Workers Act 
earlier this year, and I'm calling my Congress to finish the 
job by getting this bill signed into law. This legislation will 
allow provisions from the 2017 Tax Reform, such as domestic R&D 
expensing, interest deductibility standards, and full expensing 
provisions to be extended until 2025.
    However, Congress has a major tax battle ahead of next year 
when crucial tax policies are set to expire, directly impacting 
manufacturers here in Pennsylvania and across America. In the 
years following TCJA, Erie Molded was able to invest nearly $7 
million in new capital equipment purchasing thanks to full 
expensing. Along with this much needed equipment, we also were 
able to create new positions across our team and deliver high-
quality products to our customers.
    Full expensing was already phasing out and is set to 
completely expire in 2027. This is devastating for our 
manufacturers and has caused us to delay our own equipment 
purchases. Another harmful change that went into effect is the 
requirement to amortize our R&D expenses rather than being able 
to deduct them in the year occurred. This is a massive change 
for us, as historically, 90 percent of our R&D expenses went to 
our engineering payroll. That means eliminating R&D doesn't 
just have innovation, it also has a direct impact on people's 
jobs here and here.
    Congress not allowing manufacturers to immediately expense 
R&D directly translate to fewer quality jobs in the 
manufacturing sector, while our foreign competitors are 
implementing vastly beneficial R&D benefits. This change also 
caught me and many other manufacturers in our community 
completely off guard.
    In 2023, a full year after the R&D change, I was presented 
with taxable income that was almost six figures higher than I 
had anticipated. Changes like this mean I have to spend more 
time with my accountants and lawyers, figure out the best way 
to prepare for our future instead of going to business.
    Finally, EMP is organized as a pass- through, meaning when 
20 percent pass-through deduction expires at the end of 2025 
and individual tax rates increase, our tax bill will be 
significantly higher. Many small manufacturers are organized as 
pass-throughs, so our sector will be disproportionately harmed 
by the expiration of this deduction, severely hampering our 
growth trajectory. Similarly, since many family-owned 
manufacturers consist largely of illiquid assets, we are 
disproportionately impacted by the estate tax changes also 
coming in 2025.
    I urge every member of this Committee to preserve those and 
other pro-growth provisions which allow manufacturers to 
function as the backbone of our economy and compete on a global 
scale. I once again want to thank members of this Subcommittee 
for inviting me here today. I hope your time in the great state 
leaves you with a lasting impression as you return to work in 
D.C., and you keep the Keystone in mind as you debate our tax 
code's future.
    [The statement of Mr. Tredway follows:]
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    Chairman KELLY. Mr. Tredway, thank you. Thank you all for 
your testimony.
    My first question is going to be from Mr. Whiting. And I 
think we brought the chart up. Ms. Moore, this is for you. 
Here. Now, the reason we brought this forward, if you can see 
what happened, the taxes paid when these properties were 
acquired, taxes paid $176,185. After Erie downtown Development 
Corporation investment, it was $2,278,400. So the end game to 
all of this is, you know what, I've been through this in my 
life. There's many--a couple times in my life I paid absolutely 
no taxes and people said, how did you get away with that? I 
said, we lost money that year. Taxes are based on profits. And 
I think sometimes we forget who it is. The old story, don't 
worry about the mule, just load the wagon. When you treat the 
mule the right way, the mule can pull the wagon a lot easier 
and a lot harder.
    So Mr. Whiting, if you would explain a little bit, you're 
working in an Erie Downtown Development Corporation's Mission--
and I really miss Johnny Persinger for not being here today 
because I know it would--how important he was to that and how 
it's felt in Downtown Erie. Are there examples of the progress 
of every vitalization of downtown Erie felt in other parts of 
this community?
    Mr. WHITING. Yeah, I think--you know, we all Miss John 
Persinger here and I know he's--he's going to be watching this, 
wishing he was sitting here as well. When I said that our work 
isn't done, I meant our work is not done. The new buildings 
that you saw on State Street today, the first one opened two 
and-a-half years ago. That effort in the two and-a-half years 
since has led to--in the one-mile radius around it, over $100 
million more investment. If you look at the five and ten-mile 
radiuses from that, you're starting to see that work as well, 
with the announcement of Kyocera and Truck-Lite coming to town. 
A lot of the work in our neighborhoods starting to happen 
through the development of different CDC and other vehicles to 
get the neighborhoods ready for this kind of change.
    We are starting to see it radiate out, but it's not there 
yet. This is not a decade long situation effort. This is a 
multiple generation effort that we're going to have to 
undertake to truly do the work completely here. Ten years of an 
Opportunity Zone Act being in place is a great start, but we're 
barely at the quarter pole. Give us another 20 years and you'll 
see a county that has felt the impact of this in a much more 
thorough way than what we're seeing right now.
    Chairman KELLY. Thank you. Mr. Hawkins, You played a 
pivotal role in the Opportunity Zone legislation in your time 
being a member of the staff. Part of the Opportunity Zone 
legislation that was left out in the final package was 
transparency and reporting requirements. Opportunity Zones have 
already become one of the most successful provisions of the 
republican tax cuts. Can you speak to the importance of 
including these requirements and how it further boosts 
Opportunity Zone investment?
    Mr. HAWKINS. Thank you, Chairman Kelly. Transparency 
reporting requirements are absolutely critical. So what we know 
from a UC Berkeley study, a Treasury Department study and some 
private information brought together by accounting firm called 
Novogradac, that a hundred billion dollars at least in equity, 
has gone into opportunity zones thus far. From the Treasury 
study, we have a feel for what percentage of each state's 
opportunity zones got investments in.
    So for instance, Pennsylvania, being about 44 percent of 
the designated zones, saw some investment. And so we have some 
very broad understanding that the policy is being impactful in 
a positive way. But it's like looking through a window, a car 
window with mud on it and the transparency and reporting 
legislation would essentially be like a windshield wiper just 
pulling the mud off. And so, you know, the legislation that we 
appreciate, so deeply appreciate you introducing, would empower 
Treasury to compare the performance of Opportunity Zones 
against areas that could have been designated zones, but 
weren't, and also compare the performance, economic performance 
across a number of key metrics with the broader economy. And 
that will allow you all on this panel to tweak the policy, but 
with a clean window, if you will, you know, with a full 
understanding of what needs to happen to make the policy even 
more impactful.
    Chairman KELLY. Thank you. Could you speak maybe a little 
bit too on how the opportunity zone have an impact on rural 
communities?
    Mr. HAWKINS. Yes. So that's absolutely critical. You know, 
one of the things that we see, you know, right now, we have an 
entire Opportunity Zone map that gives us a feel, again, for 
how diffuse the investment has been. So certain states like 
Mississippi, 65 percent of their Opportunity Zones have seen 
investment. Places like Utah see significant investment. 
Montana, once again above 60 percent. We see other states where 
you're looking at below 40 percent.
    And so one key element to drive that would immediately 
drive capital into rural Opportunity Zones would be this Feeder 
funds or Fund of Funds addition to the policy. What it 
basically enables is it enables folks who don't know 
specifically where they want to invest or how to just put--to 
give that money to smaller impact-oriented funds that know 
exactly what they want to do. And in rural areas, you're more 
likely to see investment in operating businesses. In the dense 
urban areas, you're obviously more likely to see investment in 
real estate.
    And so favoring operating businesses through feeder funds, 
favoring smaller, impact oriented investors through feeder 
funds and a fund of funds concept would absolutely jumpstart 
rural investment.
    Chairman KELLY. Thank you. Jason, I wanted to ask you a 
little bit. So without the Opportunity Zones, what would the 
future of Ippa Pizza be like? And I've got to tell you, first 
of all, I think sometimes people misunderstand. You work full 
time as it is.
    Mr. SPORE. I do.
    Chairman KELLY. Yeah. So this wasn't something that you 
were looking at and say, hey, here's a chance for me to 
really--to get ahead. But you were still working at the same 
time and then developing. I'm interested in where you got the 
recipes. That's really good--that's good to be able to get 
that. In my hometown, none of the Italians would ever share any 
of their recipes with anybody else. That's just the way they 
are. The Irish, they give you anything they can give you. But 
if you can, if it hadn't been for opportunity zones----
    Mr. SPORE. You know, I couldn't tell you.
    Chairman KELLY [continuing]. Would you have been able to do 
this?
    Mr. SPORE. I'm a pretty resilient guy, okay? I fight hard, 
and I--sometimes I don't know when to give up. So I would hate 
to say no, but what I will tell you, that the speed of which, 
of what I've been able to do and how fast I've grown, okay. The 
Opportunity Zone, the EDDC, the help that they've given and 
created for me has been paramount. No way I could do it the way 
that I'm doing it now.
    Chairman KELLY. Well, I've got to tell you, so----
    Mr. SPORE. Not even close.
    Chairman KELLY. So what you're talking about never giving 
up,----
    Mr. SPORE. Yes, sir.
    Chairman KELLY [continuing]. That's not only true of you.
    That's true of this town and of this state and of this 
country. We never, ever give up. We refuse to lose. That's the 
key to it.
    Mr. SPORE. It's a great quality.
    Chairman KELLY. Thank you so much. Yeah.
    Mr. Tredway, can you speak a little bit on the impact that 
R&D has had on your manufacturing business in the community 
that you work with closely? And if R&D was not extended into 
2025, how would that impact business in the Erie area?
    Mr. TREDWAY. So we make proprietary products Erie Molded. 
Stock packaging. Not the most exciting thing in the world, but 
it does require a lot of R&D, and most of that R&D is actually 
tied up, as I said earlier, in wages. It's a lot of 
engineering, spending time trying to figure out how to make a 
product better, bring a new product to market.
    So, I mean, when that policy changed, and it'd been that 
way since, what, the mid-50s? It was one of the more 
frustrating tax policy changes I could remember since being a 
businessowner, because now I'm forced to take something I have 
to pay for right away out of pocket with cash, but expense it 
over five years. And so again, myself and a lot of my other my 
cohorts got a huge tax bill they weren't expecting.
    So I mean, I think it's one of the more--it's just a 
critical piece of legislation, especially compare--or tax code 
rather, when you compare how other countries, like, China, a 
lot of European companies treat R&D. We need to do everything 
we can to incentivize it because otherwise it's going to be 
more challenging for someone like me to make those investments.
    Chairman KELLY. Thank you. I think one of the things were 
going through Tax Cuts and Jobs Act, in the very beginning, we 
were looking at what we were doing to business around America 
and we were actually driving people out of our country because 
of our policies. The idea that we've turned that around and 
people are now saying, no, I'm going to stay in America, I'm 
going to continue to invest in America and I'm going to look to 
the future to make it a stronger America, and certainly in the 
world we live in today, if we don't understand the importance 
of that, we understand absolutely nothing.
    I want to thank you all for being here. It's really good to 
hear from you and we'll stay in touch. Right now I'm going to 
recognize my colleague from Wisconsin, Ms. Moore.
    Ms. MOORE of Wisconsin. Well, thank you so much, Mr. 
Chairman. As you all noticed, the clock has started moving now 
that I'm talking, so we're going to get through this pretty 
quickly. I just wanted to talk to you, Mr. Spore. You said that 
you learned at age 50 that marketing was extremely important. 
Why don't you bring us any samples of that pizza so that we 
could assess and evaluate the value of this investment and----
    Mr. SPORE. I will personally escort you after the hearing.
    Ms. MOORE of Wisconsin. I mean, you--you've just got to 
think. You really do.
    I just want to make a comment on some of the things that 
our Chairmen have said because I'm the only Democrat up here, 
in case you guys didn't guess. And one of the things that the 
Chairman of our Subcommittee often says, and I even heard Mr. 
Hawkins talk about how corporations don't pay any taxes, people 
pay taxes and it's passed on to consumers and so forth. And 
that the money that we call taxpayers money that we return in 
the way of tax cuts is not the government's money, it's their 
money.
    Well, listen, I just wanted to point out that when we, for 
example, cut corporate taxes to 21 percent from 35 percent, 
under that tax law, that was taxes that were owed to the public 
trough to pay for stuff like foreign aid to our ally Israel, 
for Defense, for veterans housing which is woefully inadequate, 
nursing homes for our seniors, roads and bridges.
    So yeah, it is money that is owed to all of us, and so when 
we have policies like the thing that we're discussing today, 
for example, we are deferring taxes that would have otherwise 
been paid for the public good and providing them as tax breaks. 
So, I do want people to know that, respect and appreciate that, 
it is a tax transfer.
    Now, when the Republicans here talk about how Democrats and 
Joe Biden are going to raise taxes on all these folks out here 
who are facing inflation and so forth in groceries, gasoline, 
and so forth, I do want you to know that the Tax Cuts and Jobs 
act was designed to provide those business cuts and make them 
permanent, like lowering the taxes from 35 percent to 21 
percent. They pay for them within the budget window. I can't do 
a whole class because the clock is moving, but they paid for 
them by making tax cuts to individuals temporary. So whatever 
tax cuts were made for low income or middle class people were 
temporary while business taxes were permanent.
    And Mr. Tredway, in terms of bonus appreciations, we all 
agree with that, pass-throughs, I want you to know that all 
small businesses are pass-throughs and they deserve the 
benefit, but all pass-throughs are not small businesses. So we 
need to look at that legislation. We're not talking about that 
today, because 80 percent of that money that benefits these 
small manufacturers like you goes to the big-old corporations.
    Now, that being said, I just want to thank everybody for 
being here and want to point out that I think that we have had 
very good testimony here of how we need to tighten this up 
because what we have seen, and that's not been the case here in 
Erie and not in Milwaukee, but I hear places that we all love 
like New York City or other places where we're scratching our 
heads, Mr. Chairman, and wondering was that the best investment 
of our tax monies that would ordinarily go into the trough to 
pay for toward our deficit or whatever and also up rural areas.
    Mr. Scott comes from South Carolina and so does Mr. 
Clyburn. They came up with the 10/20/30 formula and they both 
had their minds trained on making sure that those areas that 
were populated with poor people could benefit from it too. I 
don't have any problem with most of this money going to real 
estate, but maybe we ought to put some conditions around it 
where we at least have some mixed-use of it.
    If you're gonna' build gorgeous luxury apartments, maybe a 
third of them ought to be affordable housing and get that mix 
in, since it is taxpayer money that is providing this 
extraordinary capital gains treatment. As you notice, you see 
that clock there? That clock will not come on when he 
recognizes Mr. Smith here. So I yield back.
    Chairman KELLY. Well, that's the good thing about being in 
the Majority.
    Ms. MOORE of Wisconsin. That's it.
    Chairman KELLY. I know that it can be offensive at times, 
but I also would like to point out that while you may not agree 
that the Tax Cuts and Jobs Act was a great--great piece of 
legislation, the great--the most----
    Ms. MOORE of Wisconsin. I didn't say that.
    Chairman KELLY. Excuse me, excuse me, reclaiming my time.
    Ms. MOORE of Wisconsin. Oh, I'm sorry.
    Chairman KELLY. The most revenue we've ever been able to 
collect was during the TCJA. So as bad as it may be in some 
places--but I will tell you what, Ms. Moore, I would be glad to 
work with you and I would appreciate it--it would've been nice 
if some--some other folks from the democrat part of the--of the 
Committee would have been here today as just opposed to 
yourself. They were all invited. I guess they didn't find time 
and didn't see that going to Erie was going to be that big of a 
deal.
    But I got to tell you, when we stop talking about democrat 
versus republican, talk about Americans helping fellow 
Americans, I think we're much more successful in that. I try to 
stay away from that and I think that most of us, I think the--
the country in general is so polarized. We need to get away 
from that. That is what is absolutely destroying this great, 
great country.
    So Mr. Chairman, you're recognized.
    Chairman SMITH. Thank you. With the magic minute I guess, 
that's--it's great to, it's great to be here to ask some 
questions.
    Mr. Whiting, you've had a front row seat to the way that 
the Opportunity Zone program has transformed this community in 
Erie. We can see the infrastructure. When we were driving 
through the streets, you could see that there weren't vacant 
buildings, they were full. I wish that was the case in my home 
State of Missouri. It's not. But what has this program meant 
for the working families of this community? And what about just 
what has this meant to this community?
    Mr. WHITING. So I touched on it in my remarks, but I think 
it has allowed us to take the first steps of forward progress 
this community has seen in five decades. And that forward 
progressive inspires others to follow along. It creates a sense 
of optimism, creates a regained sense of community pride. And 
one of the things that we're really focused on right now too, 
when we talk about working families and small businesses, is 
we're not operating a suburban mall food court downtown. Every 
business that comes into our footprint is locally owned and we 
are giving them priorities as they build out their businesses 
so that their families can live the proverbial American dream 
by growing something that's theirs and contributing to that 
economic multiplier effect that we're all striving for.
    The work that we need to do to ensure that those businesses 
have the tools that they need to be successful is the work 
that's going to make us all sustainable. That means we need to 
continue to have expanding tools in order to be able to do 
that. Whether that's tools for businesses that are under a 
certain size, being exempt from certain taxes, investors in 
those businesses, getting something back for their dollars in 
year one, many states are doing it. There's no reason I can't 
get down to the federal level, too. You guys have the tools. 
We're here to encourage you to use them.
    Chairman SMITH. Thank you. Mr. Hawkins, while Opportunity 
Zones have been an incredible success story for many 
communities, we now know that 95 percent of the Opportunity 
Zone investment has gone to urban areas. In the Small Business 
Jobs Act that passed out of the Ways and Means Committee last 
June, and we included provisions to establish a new rural 
Opportunity Zone program more targeted to rural America.
    Given your extensive experience with Senator Scott and 
working on this program, what more should we do to ensure its 
success for rural communities? You kind of touched on that 
earlier, but what--I want to make sure that we see these 
successes all over the country.
    Mr. HAWKINS. Well, the first critical step is built into 
that very Small Business Jobs Act, is that transparency in 
reporting. And so were glad to see that the transparency 
reporting requirements in the bill you just noted, mirrored 
those transparency reporting requirements in the Opportunity 
Zone. Transparency Reporting and Extension Act that Chairman 
Kelly led. That is critical because then again, be able to make 
reasonable adjustments to the policy, but with a full 
understanding, deep understanding of why areas are getting the 
investments they're getting and what should be done, what 
specific steps should be taken.
    So for instance, when you look at the data on affordable 
housing across the country, there's a clear trend that we see 
across the country; higher--you know, higher housing stock, but 
without an intended increase in rents. Right. But the 
transparency reporting requirements that you have in your Bill 
would allow us to drill down on that and see why.
    Some governors prioritized affordable housing. They 
prioritized some areas over others. They had certain--and 
certain outlook. You know, when you look at, say, a state like 
Colorado, where 7 percent of the zone saw investment, that was 
because of an intentionality on the part of local government 
that produced certain results that they wanted to produce. So 
the first key step is that transparency legislation. The next 
step is the step you've already both taken.
    The next step is that feeder funds concept that basically 
brings operating businesses to the front of the line. Operating 
businesses are what it would be to get that number from 5 
percent, you know, to 20 percent to 10 percent, which 
directionally, is what we want to do in these rural areas.
    Chairman SMITH. So the Opportunity Zone program has not 
operated in a vacuum. It was created as part of the Trump tax 
cuts, which provided critical tax relief to working families, 
as well as businesses that employ them, including research and 
development expensing that was mentioned, which supports 21 
million jobs, a hundred percent immediate expensing on 
equipment, interest deductibility, death tax relief, and the 20 
percent small business deduction of the 199-A.
    Mr. Tredway, can you share how these pro-growth tax 
policies worked in tandem with the Opportunity Zone program to 
benefit your family-owned small business and others like it?
    Mr. TREDWAY. The pro-growth tax strategies from the TCGA 
(sic) put us in a better position to thrive. We had good things 
going our way, but having incentives to do research and 
development, having incentives to make capital investments that 
we need as a small business to both domestically and 
internationally, all allowed us to put more money back into our 
employees, back to our company. Every employee at Erie Molded 
would tell you that the owners put everything back in.
    We're sending entry-level employees through education, 
through different classes, local colleges, and local other--
educational institutions, so they can get training that will 
carry with them all the way for the rest of their lives, right? 
And we're able to do that in a way we never had before.
    So it allowed us to hire more people, bring more people to 
this region, and then if you take a look at the Opportunity 
Zones, it made it a better place for those people to live, work 
and play. I've been back in area for almost 20 years. I've 
never seen so much excitement, so much investment downtown. And 
that's a big benefit, because part of our business strategy is 
to retain and attract workers. So Opportunity Zones has had a 
huge impact in that regard.
    Chairman SMITH. Thank you. Thank you, Mr. Chairman.
    Chairman KELLY. Thank you, Chairman. We'll now recognize 
the gentleman from Arizona, Mr. Schweikert for five minutes.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman, and Mr. Chairman 
and Ranking Member Moore. We all get titles. I want to walk 
through a couple of things, and also, Mr. Kelly, I really 
appreciate it. I've never been in this part of the country. I'm 
from Arizona, and my world is very different than yours. My 
county has about 400 or 500 new residents every day. So when 
you read and look at some of this data here, it's, for me to 
get my head around what struggle really is like, but Mr. 
Hawkins, I want to walk through, and I don't mean to sound like 
a heretic, because I personally come from the real estate 
world, but if I was to sit down with you and say, okay, the 
next generation of Opportunity Zones, you want more of the 
benefits to incentivize the actual employment engine than maybe 
the--the real estate side? You know, we need many of these 
areas to have rehab, this and that, but one of my great 
concerns is, how do I get the next generation of 
entrepreneurship training, learning to show up at work, things 
like that, control of work, things like that, to actually also 
have investment. And sometimes investors who would be 
interested in that growing concern actually succeed? How would 
you design--in a short time, how would you design that type of 
feeder fund?
    Mr. HAWKINS. Sure. So you'll be familiar from the private 
equity world in real estate, private equity, the concept of a 
Fund to Funds. So where smaller fund managers, smaller 
investors are able to benefit from folks who are just coming in 
and----
    Mr. SCHWEIKERT. But--and somebody said it's two--two 
things. Over here I have my credit investment, you can--you 
could actually take some of our updated and credit investor 
rules and make it so smaller individuals could participate in 
receiving the tax benefits. And maybe even you could design 
there where you small equity interests, so you actually have a 
benefit if the concern does well. I'm just--I don't want to 
have a world where we've done amazing rehab in difficult areas 
or rural America, where you built--you fixed the building; I 
now need businesses in that.
    Mr. HAWKINS. Right.
    Mr. SCHWEIKERT. I need the next--you know, the folks who 
venture to bring in the next generation of talent.
    Mr. HAWKINS. Right. And the next really exciting--you know, 
exciting possibility is if Congress were to allow after tax 
dollars to come into Opportunity Zones or the benefit of the 
ten year--if you hold a--if you hold an investment for ten 
years, ten plus years, ten years and a day, then you get a 100 
percent step-up basis. So think of it as no capital gains on 
the new business that you started in an Opportunity Zone. So 
that'll be--that'll mirror what we see in traditional 
business----
    Mr. SCHWEIKERT. But----
    Mr. HAWKINS [continuing]. Operating business investment, 
which will create more jobs.
    Mr. SCHWEIKERT. Putting your model in your head, is it to 
the business or is it to the investors in the business?
    Mr. HAWKINS. I'm sorry?
    Mr. SCHWEIKERT. Is it to the business or the investors in 
the business?
    Mr. HAWKINS. So the gain improves--so if I start Hawkins, 
LLC, you know, and let's say it's a social media company, and 
so I invest a million dollars in capital gains into that 
business, obviously, I still owe my taxes on those capital 
gains, you know, after the deferral period ends, but there's an 
additional benefit that says Hawkins, LLC, that new business, 
if that business goes from a million dollars in value to $10 
million in value, and I hold that business for 20 years, or 11 
years, when I sell Hawkins, LLC to, you know, some larger 
company, there's no capital gains on the $9 million.
    Mr. SCHWEIKERT. Okay.
    We'll have to whiteboard this, because I'm not sure that 
completely gets my capital to run to the business, to finance 
it, to--so we'll walk through that.
    Mister--is it Tredwell?
    Mr. TREDWAY. Tredway.
    Mr. SCHWEIKERT. Tredway.
    Mr. TREDWAY. Tredway, yeah.
    Mr. SCHWEIKERT. Or I could just look at--read your 
nameplate. You actually said something--and this is one of my 
fixations for my brothers and sisters here on the Committee. 
The hundred percent expensing, which we believe may, at least 
in the text from single biggest driver of economic expansion is 
a timing effect. You still--you know, if--whether we make you 
depreciate something in seven years or five years or in one 
day, government still--you still get the same depreciation. 
It's a timing effect. The same thing on research and 
development. Perversity we have right now is you do research 
and development, you now have to finance it and then later on 
you get depreciated over the years. So now in today's financing 
costs. So I sort of wish intellectually we could all sort of 
separate that those types of expensing, it's a timing effect 
issue that creates a virtuous capital cycle so you get more 
productive so you can pay your workers some more.
    So you see, my personal fixation is, what is the next 
generation of jobs really look like? And with that, I yield 
back, Mr. Chairman.
    Chairman KELLY. Thank you, Mr. Schweikert. Now recognize a 
gentleman from Kansas, Mr. Estes, for five minutes.
    Mr. ESTES. Well, thank you, Mr. Chairman, and thank you to 
all of our witnesses for being here today. It's always great to 
get out of the D.C. Beltway and into diverse communities across 
our great nation to hear directly from Americans who are helped 
or harmed by the policies that we write or vote on.
    While today's hearing focuses on the success of good 
policy, namely Opportunity Zones that were implemented in the 
Republicans Tax Cuts and Jobs act in 2017, I want to take some 
time to highlight a few other areas ripe for strong policy 
action from this committee that can help communities in the 
Rust Belt and beyond.
    We know that nearly all Americans in every tax bracket saw 
tax relief thanks to the TCJA. The legislation's business 
provisions boosted the overall economy. However, many of these 
provisions have begun to expire, and the rest are set to do so 
in 2025. In fact, President Biden has made it clear that he 
will let these tax cuts expire, even though doing so means 
violating his pledge to not raise taxes on anyone making less 
than $400,000. This means that in my home district, hardworking 
Kansans can expect to pay $1,900 more in taxes in 2026.
    And right here in Erie, Pennsylvania, one estimate is that 
an average of over $1,700 will be paid in additional taxes, 
while Americans across the country will face similar or even 
greater tax increases. This would be on top of the historic 
levels of inflation that are currently crushing Americans and 
making it difficult to meet every day needs. According to the 
CBI data released last week, inflation is up 19.9 percent since 
President Biden took office in 2021.
    Mr. Spore, as a founder and new business owner and as a 
father, can you tell us how inflation is impacting you both 
personally and professionally? And how would additional tax 
hikes on office impact you and your company?
    Mr. SPORE. You know, just to--just to be brief. You know, 
any time I don't get to make the decisions with the capital 
that I'm earning, you know, I want to be able to make that 
decision. So it obviously--it gets harder, right? It gets 
harder. You already see that I work a lot of hours. I'm not 
afraid to work a lot of hours. Couldn't imagine adding more to 
that, so----
    Mr. ESTES. Yeah, and unfortunately, it's not just taxes 
that individuals will feel the paying if TCJA expires. Without 
action from the committee and Congress to extend and strengthen 
the business provisions in TCJA, businesses will be set back, 
hurting the economy, job creation and workers.
    We've already seen evidence of this through the expiration 
of the Immediate Research and Development Expensing Provision. 
Since amortization took effect, the growth rate of research and 
development has slowed dramatically, from a 6.6 percent on 
average over the previous five years, to less than one-half of 
one percent over the last 12 months.
    As companies spend far less on research development, the 
sector is down by more than 14,000 jobs. Three quarters of 
research and development spending is on wages and salaries, 
making R&D amortization primarily a jobs issue.
    Mr. Tredway, as a businessman in the manufacturing space, 
can you tell us how the exploration of the provisions has 
impacted Erie Molding Packaging?
    Mr. TREDWAY. So for Erie Molded, I mean, again, first tier 
sort of caught us off guard, so immediately we had a tax that 
we weren't expecting. Now, we can of course, depreciate those 
expenses down the road later, but I need to make those 
decisions now and have that money to reinvest in my company and 
my people now. So initially it was money out of our pocket that 
we were not expecting.
    Looking to the future, we will still do some R&D, but we're 
going to look at it differently. It's different math now. Now, 
like I said, for us, 90 percent. It sounds like industry 
average is 75 percent goes to wages. I know that the more I put 
into R&D, the more I'm setting myself up for a higher tax bill 
every year. And so it's going to change the math for us. So 
Yeah, it's a big problem.
    Mr. ESTES. Yeah, which makes it really damaging for your 
cash flow as you highlighted earlier in terms of having to pay 
out of your pocket this year for the research and development 
and then not being able to write that off and on taxes to 
recoup that expenditure.
    Mr. TREDWAY. Yeah, and for small businesses like ours, cash 
flow is just--it's everything. So it definitely changes the 
arithmetic for us.
    Mr. ESTES. Thank you. This Committee knows how important 
immediate R&D expensing is, which is why in January we passed a 
tax relief for American Families and Workers Act that included 
immediate R&D expensing. I'm still hopeful that my colleagues 
in the Senate will take up this legislation. And in the 
meantime we'll keep pushing ahead to ensure provisions are 
restored and strengthened in 2025 and beyond. Thank you, Mr. 
Chairman, and I yield back now as well.
    Chairman KELLY. Thank you, Mr. Estes. Now recognize Mr. 
Smucker from Pennsylvania for five minutes.
    Mr. SMUCKER. Thank you, Mr. Chairman. Thank you for the 
opportunity to be here. This is great, hearing Mr. Whiting and 
seeing what's happening in the community here was just so 
wonderful to see the commitment that's been made and the 
benefits that you're seeing.
    I represent Lancaster County in Pennsylvania. As many of 
you know, Lancaster County is on the other side of the State, 
but we had a similar--years ago I was in the State Senate and 
then I've been in Congress now for eight years and Lancaster 
city was in bad need of revitalization and there was a catalyst 
of business owners there similar to what I've heard here. Who 
really we started with the convention center and then a 
ballpark. And then you saw the effects of that over a period of 
years and decades of that initial investment, that initial 
risk, and they also took government help because we just 
sometimes can't make any initial project work, but you see the 
benefits.
    So really, really great to see similar things happening 
here and I'm so glad that the Opportunity Zone is a part of 
that. I also want to mention the Businessowner, Mr. Tredway, 
Mr. Spore, I've been a businessowner for a long time, and 
really proud of the work that we did in the Tax Cuts and Jobs 
Act and the impact. I appreciate, Mr. Tredway, you mentioned 
the 20 percent deduction, the 199-A, which is really important 
for the past three organizations.
    I do want to go back to something that Ms. Moore said, and 
that is, you know, some of the individual rates were not 
permanent and I agree, they should be made permanent and, in 
fact, they should have been permanent from the very beginning. 
We weren't able to do that because we didn't have enough--we 
didn't have Democrat support, frankly, in the Senate side. So 
we had to do it through the budget reconciliation process, 
which has specific scoring. So were not able to do that. But 
Ms. Moore and everyone else will have an opportunity to make 
those permanent because we'd like to do that next year.
    We think it's very, very important if we don't make these 
provisions permanent, it will be a big tax increase on the 
middle class. It will be a tax increase on small business who 
are generating all the jobs. And so we hope to have that 
opportunity and we hope that's done in a bipartisan way where 
we really make these things permanent. It really should be.
    So I want to get back, Mr. Tredway, to the 199-A, like, 
we're going to have to build support for that. We're going to 
have people understand, even businessowners understand, the 
impact of that. How do we build that? And we're working right 
now, we have tax teams that Chairman Smith has put together. We 
want to take this out, have people understand, the American 
people really understand the Importance of this policy. Do you 
have any ideas for us? How do we get out and talk about this?
    Mr. TREDWAY. That's a great question, because it's--you 
know, it's not the most straightforward of all the tax codes, 
right. But it makes a ton of sense. And for small businesses 
like us to be against corporations, if we don't keep that in 
place we're not losing another step on the ladder when it comes 
to how we're taxed.
    So I mean, you know, I know where I talk about taxes the 
most, just speaking my own experience. A lot of it's through 
trade organizations that I'm a part of. Trade associations, we 
always have an accountant that's involved who's talking about 
just general talking points and how we should be planning for 
the future, which again can be a challenge because the rules 
change too often, and make these things permanent. Any local 
training associations, there's one here in----
    Mr. SMUCKER. We'll do that. I'm going to--I'm going to cut 
you off because there's two additional points I want to make 
and I only got--I have a little bit over a minute. One, I'd 
love Mr. Hawkins, and I'm not sure I'm going to give you time 
to answer this, but you know, we really want this program to 
improve and we're going to have an opportunity next year to do 
that. So I'd love to hear from you. Maybe you can do it later.
    What would be some of the key things that you think would 
better ensure that this program is working for more communities 
like it's worked at Erie. And the other thing I want to be sure 
of is that we're incentivizing new dollars that would not have 
been invested otherwise. I'd love to, at some point, hear your 
thoughts on that.
    And then, Mr. Whiting, I'd love to hear from you, and I've 
run out of time, so you won't be able to answer either, but one 
of the things we learned in Lancaster, that it was a different 
thing to have all of that new development actually result in 
better standard of living for the residents of the city, and 
better jobs that residents were taking. And over time, that's 
starting to happen, but we want to find a way to make sure that 
all this new development connects with workers and improves the 
lives of people in the city. So I'd love to hear your thoughts 
on that.
    We don't have time. We found--as I said, it took a while 
for that to occur. And so, Mr. Hawkins, if you could even maybe 
provide to the Committee, your recommendations of key changes 
that we should make, and then how do we----
    Mr. HAWKINS. Absolutely.
    Mr. SMUCKER [continuing]. Connect that to ensuring that 
we're all residents, not just business owners.
    Because really, the purpose of the Tax Cuts and Jobs Act, 
the purpose of incentivizing business, is to create great jobs 
and to raise the standard of living for the entire community. 
That's what we want to get to. So I'd love to hear from both of 
you, maybe, how that's worked here, and what ideas that we have 
to ensure that happens. So, thank you. Sorry I went over time, 
Mr. Chairman.
    Chairman KELLY. No, Mr. Smucker, you know, because we're so 
limited, five minutes isn't really enough, but I hope this just 
begins a dialogue that you feel comfortable doing with us. 
Because the Chairman's idea to begin with was to take the 
Congress out into the country so you could have a face-to-face 
talk back and forth. And I think what Mr. Smucker just talked 
about, there's so much more that we have to be able to sit down 
and talk about to see where you all are in this, and how we can 
make the government truly work for you.
    I now recognize the Gentlelady from Texas, Ms. Van Duyne.
    Ms. VAN DUYNE. Thank you very much. It's great to be here 
in Erie today. And Mr. Chairman, thank you very much for 
hosting us.
    Congressional Republicans know that pro-growth tax policies 
work for American families, for workers, and for small 
businesses, and following the 2017 Trump tax cuts, individuals 
and families reaped the benefits. Real wages grew by 4.9 
percent in 2018 and 2019. Fastest two-year growth in real wages 
in 20 years.
    Similarly, from 2017 to 2019, more than 6.6 million people 
were lifted out of poverty, dropping the poverty rates to 10.5 
percent, the lowest level in U.S. history. The Real Median U.S. 
Household Income in 2019 rose nearly 50 percent more than 
during eight years under President Obama's leadership. And 
according to the Federal Reserve, low and middle-income 
families received the largest increase in wealth during 2018 
and 2019.
    And I don't want to disagree with my Democrat colleague, 
but when they talk about the $400,000 that people make not 
having taxes raised on them, I would argue that according to 
the Congressional Budget Office, that the tax cuts that were 
signed in the law by then President Donald Trump that are said 
to expire, that if they do expire, the vast majority of U.S., 
the vast majority of U.S. households would see their payments 
to the IRS increase. That the Trump's 2017 overhaul cut the 
corporate tax rate of 21 percent, intending to make it more 
competitive internationally. The law also temporarily cut the 
income taxes paid by most U.S. households, in part by trimming 
marginal tax rates and increasing the standard deduction.
    As a result of these changes, Non-Partisan Tax Policy 
Center estimated a family of 40th to 60th percentile of earners 
would average save $930 annually.
    And when we talk about the $400,000 as a mark, the fact 
that we're facing now 20 percent inflation means that has 
eroded Biden's promise on wage increases and it's pushed more 
people from $400,000 tax bracket. So a salary of $330,000 now 
would be worth $400,000 in today's dollars. So that needs to be 
taken into account. But in the face of major tax sites and 
looming sunsets, republicans will take action to ensure that 
American families and small businesses are not hit at higher 
tax rates or watered-down guaranteed deduction in child tax 
credit that's cut in half.
    I'm excited to work on the tax teams that this Committee 
has put together and ensure we help create growth for small 
businesses, such as the ones we saw today. One of the areas I 
want to address is looking at how small businesses access 
capital and threats we see from this administration. We even 
saw this a few weeks ago from the Treasury, who repeated 
misguided attacks on carried interest loophole. We've also seen 
in every single budget that's been put out by this president.
    Mr. Whiting, you stated a venture fund--you started a 
venture fund to help provide capital to small startup 
companies, to start companies. Can you discuss the challenges 
some of these small businesses face and what would happen if we 
allow the 2017 tax cuts to expire?
    Mr. WHITING. So the challenges that they face are in 
getting the risk capital needed to grow. Not at the very early 
stage, not when they've reached a point of somewhat success in 
product market fit, but it's really in that--IN THAT space 
where they need angel investors and community investors to come 
to the aide of those companies. In 2014, I helped with some 
draft legislation for the Illinois Angel Investment Tax Credit, 
and I brought that up to people in Pennsylvania when we were 
there down Harrisburg last week. That kind of tax credit could 
be something that's really useful for everybody in this country 
and could be a federal-type of thing.
    I would encourage additional investment in those businesses 
at those times. As far as the sunsetting of some of the TCJA 
provisions, I think Opportunity Zone funds can be used as a 
predicate to getting capital of any small businesses. It is not 
limited to real estate at the moment. There are restrictions, 
but I think that can be expanded.
    Ms. VAN DUYNE. All right. Thank you. Mr. Tredway, we 
continue to see proposals from this Administration, such as 
changing the long-term capital gains and qualified dividends of 
the ordinary income work for taxpayers, which could potentially 
double the tax rate from 20 percent to 39.6 percent.
    How detrimental would this change be for small businesses 
looking to access capital?
    Mr. TREDWAY. I mean, it would be a significant impact on 
companies like ours. You know, you're--again, you're taking 
that much capital, that much cash out of where we want to put 
it back into business, back in our people, back in capital and 
now we have to give it to the federal government. And that's 
money we need to do to remain competitive, not against, just 
against corporations who aren't pass- through companies, but 
also, of course, international. We don't compete in a vacuum, 
we compete globally. So it would be a major impact.
    Ms. VAN DUYNE. Mr. Spore, in the few seconds I have left, 
we've also seen interest rates at a 30-year high. Can you tell 
me how that has affected your business in having given access 
to capital?
    Mr. SPORE. I haven't had to do that.
    Ms. VAN DUYNE. Okay.
    You haven't had--Mr. Tredway, can you tell me how small 
businesses have been affected by the highest interest rates 
we've seen in three decades?
    Mr. TREDWAY. It makes the loan payments a lot different. 
And again, it's factoring in the decisions that we're--you 
know, borrowing a million dollars looks a lot different today 
than it does before, so, you know, a couple years ago. So now 
we have to--we aren't investing probably quite as much as we 
have in the past, you know, before interest rates start to go--
hike up as much as they have.
    Ms. VAN DUYNE. Thank you and I yield back.
    Chairman KELLY. Thank you. The General Lady from New York, 
Ms. Malliotakis for five minutes.
    Ms. MALLIOTAKIS. Well, thank you very much, Mr. Chairman. 
Opportunity Zones and Tax Cuts and Jobs Act passed by the 
Republican Congress with President Donald Trump were pro-
growth, pro-jobs policies that benefit the American people and 
businesses. We saw real wages grow by 4.9 percent in the first 
two years that followed, making it the fastest two-year growth 
in two decades. 6.6 million Americans were lifted out of 
poverty, dropping the poverty rate to 10.5 percent, the lowest 
level in American history. And in 2019, the Real Median 
Household Income rose nearly 50 percent more than during the 
eight years of the Obama/Biden Administration.
    But state politics matter just as much, and according to 
the Tax foundation, state business climate in my home state of 
New York is number 49, 49th Worst out of 50. Here in 
Pennsylvania, it's 31. My State, New York, is home to 514 
Opportunity Zones and my District is home to 13 Opportunity 
Zones; eight on Staten Island, five in Brooklyn. All of the 
Staten Island's Opportunity Zones are located in the lower 
income, mostly minority sections of the Staten Island's North 
Shore, which can desperately use the private investment and 
revitalization, which is the exact point of the program. But 
the lawmakers in Albany have prevented New York's Opportunity 
Zones from achieving their full potential.
    In 2021, New York stripped some of the state level tax 
benefits created under the federal program, but left in a tax 
exemption on capital gains from opportunities on investments 
that were held for at least ten years. Last Monday, the State 
Senate voted, however, 41 to 20, to approximately approve the 
measure of fully decoupling the state from the Opportunity 
Zones program. And these are the same people that drove out the 
potential Amazon headquarters out of, you know, Queens, even 
after the company said they would not reap the benefits of the 
deferred tax.
    So my question is to Mr. Hawkins, can you help my lawmakers 
in the State of New York understand what they're missing out 
on?
    Mr. HAWKINS. Right. What I would impress upon the state 
legislature there is that it is absolutely critical for the 
success of the policy. And when I say success, I mean in terms 
of benefiting the lives across a number of economic measures of 
the existing residents of Opportunity Zones, that they 
implement supportive local legislation to make sure that the 
policy is effective as possible.
    When Congress passed Opportunity Zones, they gave governors 
who were designating the zones, who were picking the places 
where this investment could occur, three non-binding criteria 
for picking the zones. The first was an area where there was 
significant economic distress, areas that have been disrupted 
through technology changes or outsourcing or those kinds of 
things.
    Second, they asked--they asked governors to look for areas 
where there was opportunity, where an investor could turn a 
dollar into five dollars. And third, they asked governors to 
look at areas where there could be usually reinforcing state, 
local and federal policy that could really help target these 
investments in the area where they need it most. And so certain 
states have been very aggressive.
    Next door in Ohio, our government implemented a 10 percent 
state income tax credit that can be literally sold at 80 cents 
on the dollar for all investment in Opportunity Zones. That 
allows us two things. One, it drives a lot of investment into 
the most distressed areas. But second, it allows the state of 
Ohio to track opportunities on investment all across the state 
in the absence of federal reporting requirements.
    And so, I mean, I would emphasize the legislature there in 
New York that this is a great policy that's changing lives and 
they should absolutely support it----
    Ms. MALLIOTAKIS. And the private investment outweighs the 
costs of the state, number one.
    Mr. HAWKINS. Absolutely.
    Ms. MALLIOTAKIS. And you're creating jobs in these 
depressed communities, number two. We saw Mr. Whiting today; 
appreciate the tour you gave us. We're seeing the private 
investment, the buildings that have been revitalized now 
occupied, the jobs, and the shops, and the housing and tax 
revenue is coming not by hammering people over the head like 
they're ATM machines. It's actually coming because the 
community is more prosperous and there's more tax revenue as a 
result.
    So my last question is for Mr. Spore.
    You're absolutely right when you say New York City has the 
best pizza. We'd love to know those two restaurants. You can 
tell me after. You don't have to say it on the mic. But thank 
you very much and I yield back.
    Chairman KELLY. Thank you for letting us know where the 
best pizza is.
    Ms. MALLIOTAKIS. It's got to be from Brooklyn and Staten 
Island, that's for sure.
    Chairman KELLY. Thank you, Ms. Malliotakis. Next, Ms. 
Miller from West Virginia for five minutes, please.
    Ms. MILLER. Thank you. I think I'm at the tail end as a 
matter of fact.
    I'm Carol Miller from West Virginia. I was born and raised 
in Columbus, Ohio. For those of you who think about that, for 
some strange reason, I think it must be Kismet, I decided not 
to go to Ohio State, but to go to a small women's college in 
Columbia, South Carolina. I met my West Virginian in South 
Carolina 51 years later. I love West Virginia. I love the 
people. And a lot of you in this room probably have relatives 
either in Southern Pennsylvania or in West Virginia. We are 
very much the same people.
    I think we've established the importance of keeping the Tax 
cuts and Jobs Act. It's so important and what's coming ahead. 
I'm a small businessowner. I shake my head. I mean, I bought 
apartments when I still had kids in diapers. I painted them 
when I couldn't afford somebody else to do it. I've been ankle 
deep in sump pump water. I've had my hands down the back of 
toilets.
    I'm a businessowner. I'm an LLC. I am not a bad person for 
being a corporation. And I can remember those huge printouts 
every time I had to make a payment, I'd mark it off. My 
interest was huge. My principal was like $45 month after month 
after month. People who make policy don't often understand the 
risk that people in business take. Small businesses in 
particular. And those small business people are the ones that 
support the Little League teams, that help the Boy Scouts and 
Girl Scouts. They're the ones that are reinvesting in their 
people and in their community.
    West Virginia is about 95 percent small businesses. So now 
I'll go back to my notes. I do represent rural West Virginia, 
and we live in a community that's very similar here. When I 
moved from Columbus, Ohio, we had 600,000 people and my 
community had about 90. And I thought, what a charming small 
town. There are 50,000 people in my city right now.
    We have suffered from bad policy and bad ideas, but like 
these Opportunity Zones, they have become a very effective tool 
to help investment in our communities. I saw our glass plants. 
I saw so many plants leaving in the 1980s and in the 1990s 
because of policy. So it's so important that we do what we do.
    I'm an original Co-sponsor of Chairman Kelly's Opportunity 
Zones and Transparency Extension and Improvement Act, and I 
strongly support it. Mr. Hawkins, thank you for working to help 
develop the Opportunity Zone policies. You know, we've seen the 
impact in our communities across the country, and it's really 
great to be here in Pennsylvania and drive around in this 
beautiful town and see the before, the during and the after. 
I'm very impressed with that.
    So I do want you, Mr. Hawkins, to give us some of your 
wonderful ideas on how we can do better and how we can target 
in our communities. And I know we probably don't have enough 
time for you to give us those pearls, because I've heard some 
of the things you've said, but it's just so, so important that, 
you know, we benefit from these Opportunity Zones.
    Mr. Whiting, thank you for being here. And I'm impressed 
what I heard about Erie's development today, and, you know, got 
to be with you earlier in the day. We're developing--
redeveloping Huntington and Charleston along our main streets 
in our town. Can you explain how long it's taken for Erie to 
see the benefits of the Opportunity Zone program and why it's 
so important that it should be extended?
    Mr. WHITING. We're at the beginning of our seventh year of 
action on this right now.
    Ms. MILLER. Seventh.
    Mr. WHITING. And I would say that we're probably a year 
and-a-half into seeing some of these benefits. It does take a 
while. That's because development takes some time and for the 
effects to take hold after that, will take time as well. We 
need more time.
    Ms. MILLER. Well, housing is also a big issue in West 
Virginia and in my district and we do have access to more 
recent data which indicates that OZ's have had such a 
significant impact on adding to our housing supply. And so, you 
know, it's up from eight percent before designation. So we also 
know that this new activity has a positive spillover in our 
neighboring communities.
    Can you also speak about your experiences of using OZ's to 
address the housing shortage here in Erie?
    Mr. WHITING. Yeah. Our OZ work has resulted in about 110 
new apartments where 14 existed prior. It's also spurred on 
additional activity that has led to efforts at more supportive 
and low-income affordable housing around the community. We have 
something to work for here now. This is a place worth investing 
in. This is a place worth creating new housing in now. And so 
the organizations like the Hammond Health Foundation, the 
Community foundation are doing that work, and I'm not sure that 
there would be the impetus to do it ten years ago.
    Ms. MILLER. I agree with you. And Mr. Spore, I want some 
Ippa. Thank you all of you for being here and taking the time 
today. We really appreciate it. God Bless you.
    Chairman KELLY. Thank you. Thank you all for being here. 
Just before we quit, I was just talking with the Chairman. So 
this is a tenth meeting we've had. and his idea from day one 
was to take the Committee out of Washington and take it to the 
country so that you can have face-to-face contact; you could 
actually have dialogue, you could give us your true feelings on 
things. I think if there's one thing missing today, it is our 
inability to communicate with each other on a calm level, 
actually exchange ideas. What's in the best interest of people 
we represent?
    By the way, there are quite a few elected officials here 
today. They're all sitting in on this. I appreciate you all 
being here. And where is Barry Copple? Barry's in the back of 
the room. Raise your hand, okay, so we can say hi to you. There 
he is. There's Barry Copple. Now why do I bring that up? We've 
had an opportunity to go through the most magnificent building 
and people say, well, how the heck did they do this? Now 
remember that the Warner Brothers started this in 1929. Not the 
best year for the economy in American history.
    Now I thought it's fascinating because we talk about 
inflation. The Warner Brothers invested $1.5 million in the 
construction of this magnificent building with memories that 
last forever when they replaced the front marquee, the cost of 
replacing the marquee, just the marquee, was $1.5 million. So 
that's inflation, but you all being here, the tenth meeting 
we've had around the country, I don't know that we've had a 
better turnout than this, and I want you to understand that if 
you have something to add----
    So we have--I'll read this to you because it's important 
that you know this. Please be advised that members have two 
weeks to submit written questions and be answered later in 
writing. I want to tell the people that are here, we're going 
to be here for a few minutes. If you want to have any type of a 
conversation with us, please don't be shy. I've been in Erie. 
I'm kind of used to this after 12 years, none of you are shy. 
Please don't hesitate to interact with us.
    But to my colleagues, I thank you all for being here today. 
This was really, really important to us, important to this 
Committee and congratulations on everything you've done. With 
that, the Subcommittee is adjourned.
    [Whereupon, at 5:41 p.m., the subcommittee was adjourned.]
      

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