WH: 'Opportunity Zones' Raised Billions in Private Investment Over 2 Years, Could Raise 1 Million Out of Poverty
The Democratic Party has been working for over a half-century to lift Americans out of poverty — mostly through social safety net programs. It hasn’t worked. Government, as it turns out, isn’t the solution to the problem. It is the problem.
The Trump White House, meanwhile, has touted “Opportunity Zones” as part of its anti-poverty package. According to a report released in late August, the Council of Economic Advisers estimates the program could lift up to a million out of poverty.
According to the IRS website, an opportunity zone is “an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.”
Locations can be designated as such “if they have been nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service (IRS).”
The program was created as part of the Tax Cuts and Jobs Act of 2017 — and it’s been a rousing success, according to the numbers.
In a recent appearance on Fox Business, Housing and Urban Development Secretary Ben Carson noted the program was doing even better than had been originally expected, drawing $75 billion in investment since it started.
“This $75 billion in two years is remarkable because as the program was put together, [Treasury] Secretary [Steven] Mnuchin and his group predicted $100 billion over 10 years,” Carson said in the Aug. 24 appearance.
“The Council of Economic Advisers also predicts that that will lift one million people out of poverty.”
He also noted a 29 percent increase in economic investment in Opportunity Zones between the second quarter of 2018 and the fourth quarter of 2019.
“It’s having a profound effect, as far as property values are concerned, they go up 1.1 percent just with the announcement of you being in an opportunity zone,” Carson said.
“So these things are actually working extremely well.”
In fact, the Council of Economic Advisers report said the program is working so well it could pay for itself.
The report said that the program “could be revenue neutral, with economic growth in low-income communities reducing transfer payments and offsetting forgone revenues from taxes on capital gains.”
“Thus, the [Council of Economic Advisers] projects that the capital already raised by Qualified Opportunity Funds could lift 1 million people out of poverty and into self-sufficiency, decreasing poverty in [Opportunity Zones] by 11 percent.”
The report noted that investment slowed in the second quarter of 2020 — as did investment everywhere, for obvious reasons.
However, the Council of Economic Advisers still maintained “the initial evidence suggests that the [Opportunity Zone] model has power to mobilize investors; engage State, local, and tribal stakeholders; and improve the outlook for low-income communities — all with limited prescription from the Federal Government.”
The program has been criticized by Democrats who say that the investment favors wealthy developers who build in those areas — and yet, Democratic presidential nominee Joe Biden wouldn’t do away with it even if he were to become president, just tweak it to advance his agenda.
According to real estate website The Real Deal, Biden has said he would look to modify the Opportunity Zone program “as part of his plan to advance racial equity across the American economy,” because of course he would.
He’d make three major alterations to the program.
The first would be to change the program’s incentives to get investors to work with community organizations.
The second would be to “ensure these tax benefits are only being allowed where there are clear economic, social, and environmental benefits to a community,” according to his campaign website.
The third would be to force detailed reporting about the impact of the investments, including “the impact on local residents, including poverty status, housing affordability, and job creation.”
And yet again, we see a politician who believes that government is the solution. The Trump administration has gotten government out of the way, creating a signature program that’s working well enough that Biden would keep it. Thank you very much, he’ll take it from here. But first, a few things to ruin everything to like about the program in the first place.
The first change would incentivize (read: force) investors to work with community groups, probably of the liberal bent and likely with an agenda that would make the investment less profitable. Thus, either the investment isn’t made or it doesn’t make the returns it otherwise would. Neither outcome benefits the community.
The second, again, assumes investment is supposed to serve left-wing political purposes. Most of those benefits have accrued already, as Secretary Carson noted. What Biden is insinuating is that those benefits aren’t serving liberal causes. Again, this obviates the purpose of the program, though. Investment isn’t charity. Make the program more burdensome and watch the money dry up.
The third is arguably the least egregious of the measures, but this is still about chastising private investors to get them to advance liberal public policy goals. Yet again, it also shows you can’t win with the left; Carson touts property prices going up, thus benefiting homeowners in depressed communities, and the Biden campaign ominously talks about reporting requirements for “housing affordability.”
Of course, Biden could do another thing to kill off Opportunity Zones: Raise capital gains taxes, which would make the new investments much less attractive.
The Democrats want to keep Opportunity Zones, they just want government directing the traffic. The whole reason they’ve been successful thus far, however, is that the Trump administration realized government wasn’t directing traffic when it came to poverty policy — it was merely blocking the road.
One hopes liberals aren’t in a position to strut out in the crosswalk again next January, hand extended, confident they’re managing the flow of cars in the most just way and that all those people honking their horns will be thankful once they see how well it’s been handled.
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