Proposed tax credits aim to boost rural growth

Attention, city dwellers: Lawmakers are trying to lure you to rural America with tax credits for home buyers and help paying student loans.

Areas with significant population losses over the last 20 years stretch from the Canadian border to Texas and from the Mississippi River to the Rocky Mountains, said Jon Bailey, who heads research and analysis for the Walthill, Neb.-based Center for Rural Affairs.

“There are some cities in Nebraska that now have lower populations than in 1890 or 1900,” Bailey said.

A bipartisan group of senators is developing incentives designed to bring people back to small towns and wants to add tax credits to President Bush’s economic plan, which Congress began considering this month.

The lawmakers propose repaying half of a recent graduate’s student loan, up to $10,000, and providing a $5,000 tax credit for home purchases. In return, people would have to spend five years living and working in counties where population has dropped by at least one-tenth over the last 20 years.

The lawmakers want the government to match individual contributions to tax-free homestead savings accounts. The proposal would extend tax credits to businesses that relocate or expand in small towns and set up a venture capital fund for business investment.

“For me, this is really about trying to create hope and vision that has seen a decline in population while the rest of the country has been growing,” Sen. Sam Brownback (R-Kan.), said. “Our plan is to try to get a focus on this area that extends primarily from North Texas up through the Midwest and Northern Plains states.”

Brownback, a sponsor of the plan, said half the counties in Kansas would qualify. The state ranks sixth in the number of states with losses in rural population, after North Dakota, South Dakota, Nebraska, Iowa and Montana.

The dozen senators backing the measure span the political spectrum, from Brownback to Senate Minority Leader Tom Daschle (D-S.D.).

Another sponsor, Sen. Byron L. Dorgan, (D-N.D.), said the declines threaten small towns and affect state economies. “The heartland of our country is being relentlessly depopulated, and we need to do something about it.”

A similar measure in 2001 did not make it to the Senate floor. Dorgan said this year’s proposal has more initial support from both Republican and Democratic ranks.