Even after decades of failed programs, Washington still doesn’t understand what makes cities and neighborhoods thrive.How
Democrats and Republicans alike have hailed the Opportunity Zone tax credit as a brilliant idea to revitalize impoverished areas by encouraging investment in exchange for deferred taxation, but the New York Times, to its credit, recently ran a deeply reported article about the bipartisan program’s unforeseen—but not unforeseeable—consequences. It turns out that the tax credit—the brainchild of Facebook billionaire Sean Parker—has set off a gold rush to build high-end apartments and hotels, as well as storage facilities and student housing, in areas, like Miami’s booming Design District, that already attract lots of investment capital. The Times sees this as a case of friends of President Trump—son-in-law Jared Kushner’s family, hedge-fund billionaire Leon Cooperman, politically connected insiders like former New Jersey governor Chris Christie, and big banks—realizing a “windfall” by capitalizing on a program meant for the poor. But Opportunity Zones are just the latest misconceived and ineffective federal program that fails to grasp what makes cities thrive.
Opportunity Zones appeal to investors looking for big, tax-protected returns. The run-up in the stock market means that trillions of dollars in unrealized capital gains are parked on the investment sidelines, with beneficiaries reluctant to cash out and pay the taxes; the same reasoning underlies Trump’s recent suggestion to index capital gains against inflation, which would free up stagnant capital. Stimulating investment by lifting artificial tax barriers has merit, but the belief that targeting some 7,000 lower-income census tracts with a special tax credit will propel their residents out of poverty ignores a long history of failed urban-development policies.(Howard Husock)
Posted by The non-Conformist