CNBC: Trump’s ‘opportunity zones’ are popular with investors, but they might offer less benefits to voters

CNBC, October 19, 2018: Trump’s ‘opportunity zones’ are popular with investors, but they might offer less benefits to voters

Just weeks before the midterm elections, the Trump administration announced details of tax breaks designed to help spur investment in economically distressed neighborhoods.

The new program targeting so-called “opportunity zones” was included in the $1.5 trillion tax overhaul enacted late last year. Republicans, who are defending majorities in the House and Senate this November, had hoped to stake their campaign messaging to the tax cuts. But the measure failed to resonate with voters on a large scale.

The new rules announced Friday outline a series of tax breaks for development in some of the poorest communities in the country, that are home to nearly 35 million Americans.

The plan has already drawn strong interest from investors. Last month, Treasury Secretary Steven Mnuchin predicted that the new program would generate more than $100 billion in fresh capital for projects in targeted neighborhoods.

Any gains from the fund are permanently shielded from taxes if the investment has been held for 10 years. In addition, the initial investment will be discounted by up to 15 percent for tax purposes after seven years.

The benefits for the residents of these opportunity zones, though, are harder to measure. A lot will depend on the details of the type of projects that qualify for these tax breaks.

Proponents of these programs argue that they help revive neighborhoods that have otherwise been passed over by investors and developers. But critics have argued that they represent tax giveaways to developers of projects that would be profitable without the incentives.
“There are very few guard rails on this investment,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition, a group of community organizations that promotes lending to underserved areas. “There’s very little in the way of ensuring that the social impact of what comes out of this is beneficial to low-income communities.”

The enterprise zones they studied often fell short in creating jobs for residents of targeted neighborhoods because “the majority of jobs were taken by commuters from outside the enterprise zone.”

And they found that these tax breaks usually ended up costing more money than they generated in added tax revenues.

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