The Opportunity in “Opportunity Zones”

The Opportunity in “Opportunity Zones”

With all the relief the president’s historic 2017 Tax Cuts and Jobs Act has failed to deliver to low-income and working-class Americans, I was recently compelled to further explore what may be a redeeming component of the legislation.

In March, Governor Newsom shared his thoughts on the investment aspect of the law, highlighting how its “Opportunity Zones (OZ),” could provide a boost to the state’s economy. 

According to the governor, the tax breaks offered in the law to spur investments in low-income communities could yield progress toward overcoming at least two of the California’s current and essential challenges which include energy investments to meet climate change goals and secondly,  generate funding for housing to help mitigate the state’s shortage that continues to add to the state’s income inequality.

The OZ is designed to reduce capital gains taxes for real estate and business investors. It encourages them to invest in designated low-income areas. If they do invest and they hold those investments for 10 years, they earn an exemption from paying capital gains taxes on those investments—often, such taxes can be as much as 20 percent. 

A recent opinion piece by Stockton Mayor Michael Tubbs offered a similar assessment on the potential Opportunity Zones offer. He highlighted the possible benefits for inland area communities like Fresno. His arguments in favor of the strategy turned on a light bulb for me. Like Fresno, the Inland Empire also boasts affordable real estate, a diverse population and a large segment of the population is low to moderate income.

This region also has great colleges and universities and by leveraging the incentives of the Opportunity Zone strategy through the right investments, this area can also encourage local talent to remain in the community and help grow the local economy through start-up businesses. In addition, OZ investments can also help attract the kinds of businesses that will provide greater opportunities for economic development and security for young families than the current explosion of low-waged warehouse jobs that will soon be replaced with automation, and in the process keep those employees and others from long commutes in search of more gainful employment. 

As the state’s vision of OZ continues to take shape, I echo the caution of Tubbs who stressed the importance of ensuring there is both clear reporting and transparency requirements for all projects funded through OZ in order to understand and track the impact of the various initiatives funded through this strategy. 

Those who follow this column know I frequently offer blistering and scathing criticism of the president and his policies, on this strategy however—I must give the devil his due. 

Of course, this is just my opinion. I’m keeping it real. 

To learn more about California’s adaptation of the 2017 Tax Cuts and Jobs Act Opportunities Zone initiative visit  www.dof.ca.gov/Forecasting/Demographics/opportunity_zones/index.html.

S.E. Williams
Editor

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