In 2017, Congress adopted the Opportunity Zone, a powerful place-based economic development tool, as part of a major tax reform. Place-based economic development tools and strategies provide incentives to re-attract jobs and capital to areas from which jobs and capital have fled. Investors in state-designated Opportunity Zone districts benefit from their mechanics: they are able to (1) defer capital gains on qualified investments; (2) step-up tax basis on invested funds; and (3) permanently avoid tax on investment appreciation. Proponents of the Opportunity Zone argued that these tax incentives will serve as an efficient way to direct investment dollars to poor areas. However, critics point out that such government interventions are stricken by corruption, abuse, and waste.
This Article analyzes and critiques the Opportunity Zone. It argues that, when compared to other place-based economic development tools, the Opportunity Zone is an extremely troublesome approach. I hone my analysis on three key dimensions: use, transparency, and participation. Focusing on those dimensions, I argue that the Opportunity Zone may well harm the very areas and individuals that it is supposed to benefit. When considering its potential to increase wealth and income inequality in particular, there is ample reason to be skeptical of the benefits of the Opportunity Zone.
Place-based approaches to economic development as such are not necessarily to blame. Rather, it is the Opportunity Zone itself, with its propensity to benefit investors and existing landowners at the expense of others, that needs reform. Accordingly, I explore proposals to restructure the Opportunity Zone. These proposals would limit the uses of invested funds, improve transparency to assess meaningful outcomes, and involve stakeholder groups through participation.
Associate Professor; Albany Law School (firstname.lastname@example.org). Thanks to Ava Ayers, Lisa Alexander, Bernadette Atuahene, Susan Bennett, Ray Brescia, Richard Briffault, Sara Bronin, Steve Clowney, Danshera Cords, Nestor Davidson, Clay Gillette, Keith Hirokawa, Michelle Layser, Julie Lawton, Anika Singh Lemar, Pat Reyhan, Rich Schragger, Kate Seely-Kirk, Brett Theodos, Mildred E. Warner, Brandon Weiss and participants at the 8th Annual State and Local Government Law Works-in-Progress Conference at University of Virginia School of Law, 2019 Clinical Writers Workshop at NYU School of Law, Seton Hall Law School’s Faculty Colloquium, Albany Law School Summer Writing and Junior Faculty Workshops for comments on earlier drafts. Thank you to Megan Bassler, Julie Dean, Beyza Diril, Andrew Hersey, Alicia Johnson, and Kristopher Wilson for excellent research assistance. Thanks also to the Albany Law School Dean’s Summer Research Grant for financial assistance. I am also grateful to the editors of the Yale Law & Policy Review for their thoughtful editing of and engagement with this Article.