Building Hope in Rural Colorado
by Jon Bailey, Center for Rural Affairs
Guest Commentary that appeared in the Denver Post on April 16, 2006
Rural Colorado needs more jobs and businesses for its future, especially in counties that face chronic population loss. There is a proposal that could create nearly 1,100 new businesses and several thousand new jobs in the 11 Colorado counties that have lost 10 percent or more of their population over the past 20 years. Senators Byron Dorgan, D-N.D., Chuck Hagel, R-Neb. and Colorado Democrat Ken Salazar have proposed the New Homestead Act, a legislative menu of incentives and policies to address rural depopulation.
One crucial provision of the bill would create Individual Homestead Accounts (IHAs), savings accounts (generally matched with public funds) that would allow tax-free withdrawals for specified purposes. Allowable uses include unreimbursed medical expenses; first-time home purchases; business development costs; and college expenses.
Any resident of a qualifying county would be allowed to create an IHA. Federal matching funds would be deposited into IHAs on a sliding scale based on income.
The Center for Rural Affairs has published a report - Building Wealth in Rural Communities: The New Homestead Act and Individual Homestead Accounts - examining the potential impact of the act on rural communities. Based on 2000 Census data, we estimate that more than 23,288 rural Colorado households would qualify for IHA matching funds.
Most of the New Homestead Act counties would qualify because they lack economic opportunity, leading to a downward spiral of decreasing population and declining economic activity. Individual Homestead Accounts have the potential to break this cycle by helping residents and newcomers in qualifying counties expand or create small businesses and jobs, purchase homes and obtain more education.
Self-employment and entrepreneurship are major factors in rural economic development. Entrepreneurship is the best option rural people have to create economic opportunities and jobs and counteract the decline in rural manufacturing and agricultural employment. IHAs would offer another economic development tool to promote rural entrepreneurship.
We estimate that nationwide, more than 153,000 businesses would be expanded or created and more than 268,000 jobs would be created in rural communities nationwide, and nearly 1,100 businesses in rural Colorado.
All states with qualifying counties would benefit from the IHA provision by creating jobs and businesses and enhancing local economic opportunities. And urban areas of states with New Homestead Act counties would benefit from a stronger rural economy.
While the Individual Homestead Account provision would benefit many rural people and communities, some minor changes would make the program stronger.
For example, home rehabilitation, renovation, and repair as well as home purchases for those who are not first-time home buyers should be allowable uses. And health insurance premiums should be "qualified medical expenses" to help the rural uninsured.
Moreover, business technical assistance and business planning should be qualified business costs. IHAs should be focused on helping more people in rural communities own and operate businesses and on providing a path for the success of those individuals and businesses.
The New Homestead Act has been introduced in Congress several times but has not yet become law. Coloradans who hope for and believe in a better future for their rural communities and state should urge their members of Congress to support the act.
Depopulation in many rural communities is tied to diminishing economic opportunities in rural America. Individual Homestead Accounts and the New Homestead Act offer a vision for creating true, nationwide ownership and opportunity society.
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Center for Rural Affairs
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