Although Opportunity Zones ostensibly are designed to benefit low-income areas, there are questions about whether they will better serve residents or investors. The Opportunity Zones portion of the legislation allows for investors to receive large breaks on capital gains taxes for investing in designated areas. The Opportunity Zones provision is one example of how the 2017 tax bill mostly benefits the wealthy. ”
The fundamental problem with Opportunity Zones is the disconnect between the size of the potential tax costs, which are uncapped, and the social benefits from the investments, which will be hard to measure,” Steven M. Rosenthal wrote last year for the nonpartisan Tax Policy Center. “In contrast to the new Opportunity Zones, the policy with the best proven record – Empowerment Zones – focused on people and local services, not just capital investments,” Looney wrote last year. Local leaders wisely selected two tracts at either end of the Fourth Plain corridor for Opportunity Zone designation, noting that areas in between are more residential than commercial. Opportunity Zones are being hailed as a boon for investors, and attracting commitments to depressed areas can create benefits throughout the region’s economy.
As a recent article in The Columbian detailed, Opportunity Zones can play a role in revitalizing depressed census tracts in Clark County. Five zones in the Vancouver area and two in Washougal are among 139 statewide that were chosen under a program created by the 2017 Tax Cuts and Jobs Act. The Opportunity Zones portion of the legislation allows for investors to receive large breaks on capital gains taxes for investing in designated areas.
But critics warn that the structure of the law encourages investment in areas that already are gentrifying rather than those most in need of help. As Hilar Gelfond and Adam Looney wrote last year for the nonpartisan Brookings Institution: “The new archipelago of domestic tax havens will surely attract investment from those investors who do hold substantial sums of unrealized gains. Few federal policies feature such large, uncapped tax subsidies with so few limits on how those subsidies can be used.”