What Determines Where Opportunity Knocks? Political Affiliation in the Selection of Opportunity Zones

63 Pages Posted: 5 Mar 2020 Last revised: 18 Jan 2022

See all articles by Mary Margaret Frank

Mary Margaret Frank

University of Virginia - Darden School of Business

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Rebecca Lester

Stanford Graduate School of Business

Date Written: January 15, 2022

Abstract

We examine the role of political affiliation during the selection of Opportunity Zones, a place-based tax incentive enacted by the Tax Cuts and Jobs Act of 2017. We find governors are on average 7.6% more likely to select a census tract as an Opportunity Zone when the tract’s state representative is a member of the governor’s political party. This effect is incremental to local demographic factors that increased the likelihood of selection, such as lower income levels and preceding improvements in local conditions. Selection of politically affiliated tracts is greatest in Republican-governed states, where the effect increases to 13.2%. Furthermore, we find two procedures used by some governors when selecting Opportunity Zones – proportional allocation across a state and delegation of initial nominations to local authorities – offset the role of political affiliation. These results enhance our understanding of the selection of place-based economic incentives, providing evidence relevant for concurrent and future academic literature and legislative proposals.

Keywords: Place-based tax incentives, Opportunity Zones, Tax Cuts and Jobs Act

JEL Classification: H24, H25, H21, O18, O21, R38

Suggested Citation

Frank, Mary Margaret and Hoopes, Jeffrey L. and Lester, Rebecca, What Determines Where Opportunity Knocks? Political Affiliation in the Selection of Opportunity Zones (January 15, 2022). Available at SSRN: https://ssrn.com/abstract=3534451 or http://dx.doi.org/10.2139/ssrn.3534451

Mary Margaret Frank

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4432 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/frank.htm

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Rebecca Lester (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

HOME PAGE: http://www.gsb.stanford.edu/faculty-research/faculty/rebecca-lester

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