Lawmakers often tout pro-gentrification tax incentives such as the new federal “Opportunity zone” tax incentive-the tax break offered to developers in the Tax Cuts and Jobs Act of 2017-as tools to promote capital investment in poor neighborhoods. What many advocates regard as a flaw of such incentives-specifically, the lack of safeguards to protect poor communities-may actually be a feature of the policy, says a new paper from a University of Illinois expert who studies the intersection of tax law and social policy.
The development of place-based investment tax incentives can be explained as a predictable result of the “Pro-gentrification legal, business and political environment that produced them,” said Michelle D. Layser, a professor of law at Illinois. “Public discussion about tax incentives to encourage investment in low-income areas often comes from two perspectives: pro-growth and anti-poverty,” Layser said. “Many commentators are skeptical. But really, this isn’t new. Tax incentives to invest in poor areas have never been designed to advance the needs of poor communities, and opportunity zones are just another chapter in a much longer story.”
The paper provides a roadmap for designing community-oriented investment tax incentives that employ “Mental mapping techniques to inform the tax incentive designs” and pilot programs of community-oriented investment tax incentives that would enable researchers to study their impact and evaluate their potential as large-scale anti-poverty programs.