Charting Our Course: First-Year Reflections from Giving Compass

Opportunity Zones Will Only Enrich Investors if There’s No Push for Equity

Giving Compass' Take: • Cleveland Scene reports on a new tax incentive intended to funnel money into high-poverty areas for development (Opportunity Zones); the problem is, loopholes may make it easier for already-prosperous areas to profit. • What can local leaders do to make sure that poor people receive the benefit of the policy? The progress of these Opportunity Zones in Cleveland could be a model — or warning sign — for the rest of the U.S. • Here's more on philanthropy’s power to fuel economic development and alleviate poverty. Investors nationwide are rubbing their hands together as they wait for a full set of rules from the U.S. Treasury regarding Opportunity Zones, the new Federal tax incentive that targets high-poverty census tracts for economic development. Investors will be able to postpone or forego capital gains taxes if they invest those gains in the zones, or else put that money into "Opportunity Funds" created for such investments. In Cleveland, a cohort of leaders are trying to ensure that the majority of these dollars don't flow into already prosperous areas. Parts of Tremont, Ohio City, Downtown and University Circle are among the local designated Opportunity Zones. They were selected based on input from the city of Cleveland, Cuyahoga County and a handful of local economic development organizations, including the Greater Cleveland Partnership and the Fund for Our Economic Future. The think tank Policy Matters Ohio, in a report published this week, said that the tax incentive might enhance poor communities, but unless the program is implemented carefully, it could also increase inequality. The program is intended to direct the investment of capital gains, 64 percent of which, in Ohio, belong to the richest one percent of tax filers, (average annual income of $1.2 million or higher). They'll benefit greatly from the tax cut. But as Policy Matters reiterates, tax cuts drain scarce resources from the public sector, which, unlike investors, isn't focused on maximizing its profits to the exclusion of all other considerations. Read the full article about "opportunity zones" and equity by Sam Allard at Cleveland Scene.