Our political discourse has become so polarized we can no longer decide whether policies are good or bad based on merits.
Whether people think positively about Opportunity Zones, for example, depends on who you ask and how you ask it. Those in the “anything Trump did was bad” camp will say the rich just found another way to get richer. Those in the “measuring impact” camp point to the billions of dollars invested in historically neglected communities meeting the intended goal: private capital investing in some of the least fortunate.
Take Erie, Pennsylvania, for example, which holds the dubious distinction of being the poorest zip code in America. Once a bustling transportation hub, Erie flourished during industrialization only to see steep decline and depopulation as part of the Rust Belt de-industrialization.
The median household income in Erie is now approximately $33,000. Many homes are blighted. It is considered a food desert, meaning residents have no or limited access to healthy food options, usually because a grocery store is too far away.
But with the Opportunity Zones, tax incentives gave communities like Erie a fighting chance to attract outside investment by providing deferral, reduction, or even elimination of income tax liability on eligible capital gains invested in Opportunity Zones. Governors had discretion to nominate up to 25% of their states’ low-income census tracts, which was then verified and approved by the Department of the Treasury. Critics argued that many designated Opportunity Zones were already rebounding and attracting private capital. However, the Government Accountability Office — the independent, nonpartisan agency charged with overseeing how our tax dollars are spent — issued a report that found the selected tracts had, on average, higher poverty and a greater share of nonwhite populations than eligible but not selected tracts.
This means most designated tracts are areas that need the most investment. And places like Erie use Opportunity Zone incentives to capture investment that would not ordinarily make its way to the community. Opponents of Opportunity Zones denigrate the incentive merely as a way for the rich to get richer. What these critics do not acknowledge is that the rich are likely going to get richer anyway, given their ability to deploy capital across a wide array of investment opportunities. What differentiates Opportunity Zones from investing in the stock market or Treasury bonds is the incentive for capital to be poured into communities that desperately need it.
Measured by investment, Opportunity Zones are a policymaker’s dream. Erie has attracted over $100 million in new investment, bringing new jobs, new businesses, and a grocery store and food hall. Perhaps one of the most overlooked benefits of new businesses and development in these communities is the added tax revenue for the local jurisdictions and school districts, which will improve the public services and community environment for Erie residents and visitors alike.
Social impact investing is on the rise. However, Milton Friedman’s doctrine that the only social responsibility of a company is to increase profits still holds true. Therefore, we must incentivize investment where we need the most impact, which is how Opportunity Zones were designed. Opportunity Zone capital is patient capital, and the long-term investment into a community provides not only a financial return but a social one as well. While investors may be motivated by the tax benefit, they can also make a positive difference in disinvested, overlooked communities.
Opportunity Zones have attracted nearly $75 billion in investments in their first two years when the initial projection was $100 billion in 10 years. Too many in the pundit class think only of what helps the home political team and hurts the other team, rather than looking at whether any given policy is meeting its goals and helping to make the country a better place. There is power, potential, and promise in Opportunity Zones to decrease the ever-present wealth gap and reposition entire communities on an upward trajectory. Let’s embrace that mindset. Otherwise, the next generations will be denied the ultimate gift: opportunity.
Ben Carson is the founder and chairman of the American Cornerstone Institute and the former secretary of the Department of Housing and Urban Development.
