76 Pages Posted: 24 Sep 2020 Last revised: 4 Mar 2021
Date Written: March 3, 2020
In 2017, Congress adopted the Opportunity Zone, an unheralded yet powerful place-based economic development tool, as part of tax re-form. Place-based economic development tools and strategies provide incentives to attract jobs and capital to areas where jobs and capital have fled. Investors in state-designated Opportunity Zone districts are able to (1) defer capital gains on qualified investments, and (2) reduce their tax bills when selling qualifying real estate or business property. Proponents of the bipartisan Opportunity Zone argue that tax incentives are an efficient way to direct investment dollars to poor areas. Critics, however, point out that such government interventions in the economy are stricken by corruption, abuse, and waste.
This Article analyzes and critiques the Opportunity Zone, and argues that compared to other place-based economic development tools implemented through law it is an extreme and potentially frightening approach. I identify three key aspects—use, transparency, and participation—which focus my analysis on the extent to which Opportunity Zones may in fact harm the areas they are supposed to benefit. There are prudent reasons to be skeptical of the benefits of the Opportunity Zone, especially considering their potential to widen and increase wealth and in-come inequality.
I argue that place-based economic development strategies are not necessarily to blame. Rather, it is the Opportunity Zone, a tool to benefit investors and existing landowners, that needs reform, or elimination. I explore proposals to restructure the Opportunity Zone that limit the uses of invested funds, improve transparency to assess meaningful outcomes, and involve stakeholder groups through participation.
Keywords: economic development law, opportunity zones, tax incentives, place-based tools, state and local government law, poverty law
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