It is possible to be in favor of “opportunity zones.” One might reasonably have faith in the idea of politicians and bureaucrats knowing what needs to be done and how it should be done.
However, I find that grand experiment in socialism we call the 20th century to be a useful antidote to such beliefs. It’s also possible to take the Milton Friedman view, which is that the government always and only wastes money and that therefore, we should be in favor of absolutely any tax cut at all. I take that point but can’t abide by opportunity zones.
The first problem comes with the government itself. Opportunity zones are special areas where politicians and bureaucrats identify that more investment is needed. That’s why opportunity zones are tax breaks upon investments in special areas. I don’t have faith that the politicians will even be able to identify the right areas to invest in.
For example — and it is just an example — there are areas in the Alleghenys designated as opportunity zones. A useful map is here. I know this is unpopular, possibly even harsh, but there are populations listed here that should be relocated, not subsidized into more investment. We don’t mine much coal in these areas anymore, hardscrabble farming is, thankfully, a thing of the past, and wood is easier to get from elsewhere. Most important: Technology changes, and the distribution of people and economic activity does too.
This is also why many people who go away to college tend not to come back home. Just as there are, at times, areas of the country that grow, so, too, are there places that should be shrinking. But guess where those opportunity zones are often put? Exactly where the shrinking should continue.
My other objection situates on a larger principle: the base idea with opportunity zones is that taxes on investment reduce investment. This must be so — otherwise, a reduction on the taxation of investment would not be expected to increase that investment, would it? We’re also all agreeing that more investment makes a place better off.
In fact, we’re agreeing that investment makes everyone in a place better off, so much that we think reduced taxation, in order to make all those folks better off, is a just great idea.
Well, then, let’s follow that idea to its conclusion: Why are we taxing investment at all? If we agree, which we do, that investment is good and taxes reduce it, then let’s not tax investment because that’s good, right? Instead of feeding investment taxes into the maw of the government, why not just not take the money in the first place? Why not leave individuals to build the economy just as we’ve already agreed they do better at than the government?
Put another way, the entire country should be an opportunity zone.
