Time to Step Up: Modeling the African American Ethnivestor for Self Help Entrepreneurship in Urban America


Almost $6 billion in taxes paid by the American people have been rather ubiquitously placed in the hands of a federal subsidy program for investors in low income communities. The subsidy is in the form of a tax credit. The program is entitled the New Markets Tax Credit (“NMTC”) initiative. Under the program, the tax credit is used to lure investors to provide equity capital into low income areas, urban and/or rural (i.e. a new market for equity funding). According to my companion law review article (Florida Tax Review, Spring, 2007; The Florida Tax Review was ranked 1st among tax journals in 2005, and 2nd in 2007) approximately $2 billion of those subsidies have been co-opted by investor groups. These groups establish gentrifying projects such as venues for symphony orchestras, upscale hotel-convention center complexes, and high priced condominiums. These problematic projects are designed primarily for the financially well healed who migrate to urban low income areas, transforming low income residents to at-best incidental beneficiaries who are marginalized rather than prioritized by the subsidies.

Rather than merely complain about federal government failures in its tax credit program, this article provides a self help model from the private sector - a carefully configured substrata of the African American middle class- to play a greater role in solving the urban crisis. I term that investor group “Ethnivestors”. The model rejects several types of African Americans, and identifies only one with requisite characteristics akin ethnic entrepreneurship of its prior generations and other immigrants. Those groups also faced hostility and exclusion, who nonetheless formed vertically and horizontally hyper-efficient ethnic economies, armed with rotating credit unions and most importantly a trusting nurturing role within their respective small businesses for its otherwise marginalized co-ethnics. It is past time for such a reconfigured African American middle class on its own collective volition to be part of the revitalization of the urban core cities through a revitalization of its own, fostering a reunion of sorts with low income residents of common ethnicity.

Part I of this article examines the historical development of ethnic enclaves in the United States, and how ethnic entrepreneurship gave rise to an ethnic enclave economy that can provide a valuable template for a modern day Ethnivestor. I maintain the NMTC target communities are also ethnic enclaves. Part II sets forth the conceptual precepts and then the Ethnivestor model, including various characteristics and investment motivations that make an Ethnivestor well suited for a NMTC transaction. Part III is the application of economic principles to further explore whether the Ethnivestor model may lead to increased utility for the target low-income residents and the Ethnivestor in a NMTC transaction beyond that of investor groups not similarly engaged in social entrepreneurship. Finally, Part IV is the application of the theoretical model to provide concrete illustrations of how the Ethnivestor more efficiently meets the congressional purpose of assisting low income residents without marginalizing them in the process. This discussion emphasizes the importance of small business modeling that incorporates the experiences of other ethnic enclave economies. The NMTC structure and transactional scheme is also explained, followed by a discussion of how the Ethnivestor can seamlessly operate within that structure.


Civil Rights and Discrimination | Economics | Land Use Law | Law and Economics | Taxation-Federal | Tax Law

Date of this Version

February 2007