Place based policies 3** Flashcards
(20 cards)
Which law created Opportunity Zones?
The Tax Cuts and Jobs Act of 2017.
Who selects which areas become Opportunity Zones?
State Governors, up to a fixed percentage of their state’s census tracts.
What is the basic tax benefit for investors in OZs?
Capital gains on OZ investments are either untaxed or taxed at lower rates than non-OZ gains.
What’s the theory behind OZs helping poor neighborhoods?
The tax break makes investors pursue projects they otherwise wouldn’t, channeling new capital into under-invested areas.
How do investors get their original gains tax treatment?
They roll over unrealized capital gains into an Opportunity Fund and defer the tax on those original gains.
How are gains on the OZ investment itself taxed?
Appreciation gains in the OZ fund are taxed at progressively lower rates the longer the investment is held.
What types of projects can OZ Funds finance?
Commercial/industrial real estate, housing, infrastructure, and existing or start-up businesses.
What real-estate rule must OZ projects meet?
Properties must be “substantially improved” (major rehabilitation or new construction) to qualify.
How do OZs differ from old Empowerment Zones (EZs)?
OZs focus heavily on real-estate equity; EZs directly subsidized hiring zone residents.
Why does “marginality” matter for OZ benefits?
Only truly incremental projects—those that wouldn’t otherwise happen—generate neighborhood gains.
What makes a tract eligible for OZ status?
Either a poverty rate above 20% or median income below 80% of the area median.
How can governors’ OZ picks encourage “rent-seeking”?
They may designate tracts where politically connected developers already plan projects.
Why worry that OZ tax breaks won’t help residents?
Because incentives aren’t tied to hiring local people or improving their lives directly.
What does “infra-marginal projects” mean?
Projects that would proceed without the subsidy—so investors get free tax breaks without extra benefit.
How did Atkins et al. compare OZs to non-OZs?
They matched OZ ZIP codes to similar non-OZ low-income ZIP codes using propensity-score matching.
What key outcomes did they track?
Number of online job postings and average wages for those postings.
What identification challenge do they face?
OZs weren’t randomly assigned; designated areas may already have been on better growth paths.
Did Atkins et al. find more job postings in OZs?
No—OZ areas saw no increase in job postings compared to matched non-OZs.
Did they find higher wages in OZ job postings?
No—the average wage of postings in OZs did not rise relative to comparisons.
Are these early results definitive?
No—more time, data, and refined methods are needed for a conclusive assessment.
