New York Times, A Trump Tax Break Is Not Spurring Job Creation, Study Finds:
A new tax break that President Trump frequently touts as a boon to black Americans and hard-hit communities is spurring relatively little job creation while disproportionately helping high-profit real estate projects and not small businesses, an extensive new study by the Urban Institute has found.
The report, released on Wednesday, draws on interviews from more than 70 key players in the deployment of money — mostly from wealthy investors — into so-called opportunity zones. It is the most comprehensive look to date at the effects of the zones, which were created as part of the 2017 tax law and for which the government has scant data.
Opportunity zones are spread across the country, in rural, urban and suburban areas that state and local officials selected, under criteria set out in the law, as in need of additional investment and economic growth.
The zones offer tax advantages to investors who take the proceeds of a capital gain, like the sale of stocks or a family business, and invest them through a fund into a qualifying project in a designated zone.
The report praises the zones for catalyzing a “new community development ecosystem” of Americans who want to invest in hard-hit areas. But it finds that entrepreneurs eager to start businesses and community-oriented projects are struggling to connect with the investors who stand to reap tax benefits.
Many of the developers interviewed for the report made clear that their projects would have proceeded even without the tax incentive, the report finds.
The tax break allows investors to roll capital gains from other investments into funds that seed projects in the zones. Taxes on those original gains are deferred and, if the investment is held for several years, can be sharply reduced.
“Although there are compelling examples of community benefit,” the researchers conclude, “the incentive as a whole is not living up to its economic and community development goals.”