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Tax Foundation: What We Know and Don’t Know About Opportunity Zones

January 8, 2019
By Scott Eastman, Nicole Kaeding

The U.S. Treasury Department has proposed regulations to implement Opportunity Zone programs.

The Tax Cuts and Jobs Act created the Opportunity Zones program to spur investment in economically distressed census tracts. Opportunity zones reduce capital gains taxes for individuals and businesses who invest in qualified opportunity zones.

Research suggests place-based incentive programs redistribute rather than generate new economic activity, subsidize investments that would have occurred anyway, and displace low-income residents by increasing property values and encouraging higher skilled workers to relocate to the area.

While opportunity zones present certain budgetary and economic costs, it is unclear whether opportunity zone tax preferences used to attract investment will actually benefit distressed communities.