Policymakers often enact programs for the needy but the benefits go mainly to businesses and special interests. The benefits of the low-income housing tax credit are siphoned off by the finance industry. The earned income tax credit pushes down market wages, which subsidizes businesses that hire low-income workers. Farm subsidies benefit wealthy landowners, not so much tenant farmers.
“Opportunity Zones” also illustrate the phenomenon. The Tax Cuts and Jobs Act of 2017 created capital gains tax breaks for 8,700 supposedly disadvantaged neighborhoods. Capital gains tax rates should be reduced across the board, but O‑Zones split the nation into winner and loser areas, with landowners in the winner areas enjoying a get-rich-quick bonanza as the tax breaks were capitalized in prices. Some landowners have seen their property values jump 50 percent.
Bloomberg reports on downtown Portland, Oregon, which is a big O‑Zone:
On a wet December evening, Mark Goodman steers a black Mercedes SUV into an open-air parking lot, one of dozens of development sites his family owns across downtown Portland, Ore. This one, he says, will be a $206 million tower with ground-floor retail, six floors of offices, and more than 200 luxury apartments. Amenities will include a yoga studio and roof deck. But the centerpiece will be a swimming pool that cantilevers out of the eighth floor. “The one thing I can say absolutely with certainty—it’ll be the finest for-rent product in the city,” Goodman says. It’s also eligible for a U.S. tax break meant to help the poor.
… Oregon did an audacious thing: It selected the entire downtown of its largest city to be eligible for the law’s suite of benefits, as well as neighborhoods such as the Pearl District, where new high-rises loom over old industrial spaces converted into “creative” offices and boutique furniture stores sit near juice bars serving açai bowls. The Central Eastside, an area that Portland’s alt weekly crowned the city’s “best food neighborhood,” is also included.
Oops! That doesn’t sound like a disadvantaged area. The Portland O‑Zone was designated by Oregon Governor Kate Brown, who is a left winger favoring “economic and business equity.” I don’t know how açai bowls fit into the governor’s vision of equity, but I do know that O‑Zones are the opposite of equality and fairness under the tax law.
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Here are other commentaries on O‑Zones:
www.cato.org/blog/opportunity-zones-whom
www.downsizinggovernment.org/opportunity-zones-fuel-corruption
