Tax proposal aims to fight population loss on the Plains

MICHIGAN, N.D. -- Matt Kroke offers a grim assessment of managing a store in this sleepy northeastern North Dakota town of 345.

"Someone dies in this town and it affects our bottom line," he says.

Business at the store he runs for his father has slowly deteriorated, leaving Kroke with little choice but to begin closing up and selling off what remains, from the furniture to the bike helmets that had been shelved near the front windows for so long their boxes were faded by the sun.

A group of U.S. senators is now proposing that the government help businesses like Kroke's store stay open, even expand, by offering tax breaks and investment cash to slow a depopulation trend across the Great Plains.

Sen. Byron Dorgan, D-N.D., and 12 other senators are sponsoring legislation to help counties that have lost more than 10 percent of their population in the last 20 years. Most of those counties lie in a swath stretching from Texas and New Mexico to Montana and North Dakota.

"None of us know whether this ultimately works," Dorgan said of the proposal. "But we know what doesn't work: doing nothing."

The senators named the bill the New Homestead Act after the 1862 law that offered free land to the migrants who settled the West.

Tax credits and incentives

The bill would forgive 50 percent of college loans -- up to $10,000 -- for anyone who lives and works in an eligible county for five years. It also would offer tax credits and new deductions to home buyers and businesses, and a venture capital fund to guarantee private investments in small-town businesses.

Kroke moved to the small town of Michigan 10 years ago from East Grand Forks, Minn., to run the Johnson Store for his father, Forrest. He had a few up-and-down years, but business finally slid away. He decided to close the store, figuring his inventory would generate enough cash to cover the business' debts.

He said he will look for work in Grand Forks, about 50 miles away, but wants to keep his family in the small town.

Although the New Homestead Act would come too late to help his store, Kroke would like to see its business incentives pass.

"You have to have jobs before you can get people to move here," Kroke said.

Rutgers University professor Frank Popper said that sentiment echoes an idea at the heart of the "Buffalo Commons" theory he and his wife Deborah Popper, a professor in New York, developed 15 years ago: "The town's here because the town's here."

They argue that the Plains were oversettled and contend population declines are part of a trend toward a changing landscape. Their ideas, including suggesting farming be replaced by nature preserves and bison herds, have drawn the ire of many in the Great Plains.

Popper said the budget climate in Washington might sink the New Homestead Act, but it still brings needed attention to the region's population plight.

Dorgan, who wrote the bill with Sen. Chuck Hagel, R-Neb., said he now counts more early supporters among both Republicans and Democrats than the bill had in the last Congress, when it failed to get to the floor of the Senate.

In a nonbinding vote earlier this year, senators said any tax overhaul considered by Congress this year should include provisions similar to those in the bill. They also made room in next year's budget for parts of the plan, although its total cost has not been determined.

North Dakota voters rejected similar incentives at the state level last fall. Opponents of the plan, which included income tax breaks and a college loan support program, argued it would cost too much and would not stop young people from leaving.

Dorgan said it could take years for the Homestead Act to get enough support to pass Congress.

However, he argues that the need is clear, and notes that the federal government has helped troubled cities.

"Now rural areas are in trouble, and it's time for this country to decide whether it's time to restore economic life to the rural areas," he said.

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On the Net:

Act background: http://dorgan.senate.gov/features/homesteadact.cfm