6 days ago
Congress Is Subsidizing the Wrong Neighborhoods
When President Trump signed Republicans' 2017 tax legislation into law, one section in it stood out for its ambitious goal: directing private investment dollars to left-behind communities. The law provides a tax incentive for long-term investment in economically disadvantaged communities that were designated by governors as so-called opportunity zones, subject to federal standards based on the communities' median income and official poverty rate.
It was a worthy attempt at bolstering development in areas needing greater investment to stimulate the local economy. As The Times reported in 2018, Senator Tim Scott, a South Carolina Republican who championed the provision, explained that he was motivated by his belief that 'there's untapped potential in every state in the nation.'
The problem? Opportunity zones were meant to be a game changer for persistently poor areas, but under the current law, far more money has gone to communities that qualified as poor but were already growing economically.
Today, as Congress considers extending opportunity zones in Mr. Trump's 'big, beautiful' budget bill, many of its members appear to be overlooking this flaw and setting the program up to continue failing the very Americans it was meant to help.
But there's still time to fix it.
Before the 1980s, lower-income and economically depressed neighborhoods tended to improve over time as the benefits of economic innovation spread to workers and areas across the country. The past 40 years have been a different story: Poorer areas tend not to catch up to better-off areas.
Opportunity zone tax incentives are meant to encourage the private sector to create the scale needed to turn around communities. The idea was that individuals would be spurred by generous tax breaks to reinvest capital gains into new businesses, which would generate economic development in struggling areas and in turn increase jobs there.
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