During our “Black Safe” review on The Randolph at Broome, we got into a heated argument about the Washington Post’s recent article on Opportunity Zones. These are generally low-income areas that a state can designate to qualifying investors for capital gains tax breaks. As we so eloquently put it in our lively discussion at Randolph’s, the two conflicting viewpoints we have are from a place of optimism and from a place of pessimism:
Idris’ take: Opportunity Zones are one way that lesser served communities can be revitalized. This program could potentially work to give people a means to level their playing field and build wealth in their communities. The programs attached could train, educate, and give financial stability to the neighborhoods in this opportunity zones.
Dougie’s take: Opportunity Zones are too good to be true. Historically, the companies participating in these programs have done so for personal gain and have not helped the communities that the architects of these programs said they’d serve. Major corporations will (and have historically) used the program’s benefits to further gentrify.
Idris Gray: So let’s get into it. Have you read the article? What were your first thoughts on it? I’m thinking that you may not like my view on it, haha!
F. Dougie: Yeah man, I’m super skeptical of this kind of thing. I feel like these guys talk a big game, and it may sound good on paper, but when you really dig down into what these o-zones do and have historically done, they aren’t for us and won’t actually help underserved communities.
Idris Gray: So, I’m on the opposite end here. I’m thinking that this could be a wonderful opportunity for some of these more underprivileged areas and the people in them to elevate their economic standing. Is there cause for skepticism? I think so. Is there also a chance that this can improve communities and help to empower the people that currently live there? I think so too.
F. Dougie: You’re right. I’ll concede that in the right hands, this could be a brilliant idea. This particular iteration of Opportunity Zones was created by a Republican and a handful of billionaires and is also championed by Trump himself. For me, the main reason for my skepticism is because it has been the modus operandi of the Republican party to pretend to serve the poor, claim to support the working class all while giving huge tax breaks to the rich and powerful.
With billions in for-profit capital likely to flow into poor communities, there’s a chance that the very people the program is intended to lift up could instead get pushed out.
Idris Gray: Damn, well when you put it like that! Listen, I never want to champion an idea from the mouth of the “commander-in-thief”, but there seems to be some upside here. Now, it’s important to differentiate a social program from an economic one. This, to me, is an economic program built to incentivize big companies for building in these “O-zones”.
This isn’t welfare, or healthcare right? The byproduct of this is what should positively affect the lives of the common man. But this is a tax break to millionaires for moving your business locations to one of these areas. The value proposition for the common man is the opportunity to also take advantage of these new revitalized communities. From the small business contractor to the person looking for educational training. To the individual investor looking to purchase property in one of these areas. But you are right, this will without a doubt displace some people.
F. Dougie: “How could you be sooo heartlessssss”? (Kanye Voice) Are we breaking a few eggs to make an omelet now? Is that kind of loss acceptable?
The tax breaks are the biggest part of this, and for me, that is where the problem starts. Investors will soon be able to shove capital gains into projects/companies based in these zones, slowly erase their tax obligations, and then also turn around and grow the proceeds tax-free. There are almost no limits. That’s scary. Amazon, for example, hasn’t even stepped foot in NYC yet and they’ve already been given a $3B Matrix-dodge on their tax responsibility.
Will tax incentives really encourage investors to help revitalize low-income communities? The people that built this, claim that the program will reduce poverty, and bring jobs. The crux of the argument for the O-Zone program is that tax incentives for participating investors will turn problem areas into areas of economic growth and innovation. I’ve actually had some time to research similar efforts from the past, and now I feel even more hesitant about this program. Many of the results and findings suggest that these programs are not helpful. I think this data will further support my point that historically, programs like this have not been on our side.
Idris Gray: You’re right. One displaced family shouldn’t be acceptable. Perhaps there are ways that we can educate communities on how to best navigate these upcoming changes?
The map in the article greatly concerns me, D. Especially, now that I see how they’ve split up Queens. There are parts of Long Island City and Astoria on this map! As far as I know, these are pretty wealthy areas. But according to EIG, the areas are designated by income and not by property value. So I’m a little torn on this designation based on personal experience. Nevertheless, I think the situation with taxes and companies avoiding taxes is a rampant problem. Whether they take incentives to not pay tax by investing in these zones or find loopholes by moving production sites to India. They gone save that money.
Now in terms of the claim to reduce poverty and revitalize areas. It seems to me like the standard way economies start to flourish is through business. So this would seem beneficial. But I do hear what you are saying. What exactly happens to the people who live in these areas? I think that’s where both our concerns lie, but from different perspectives. How does lil Taquan benefit from this? How does Jalisa maximize her growth potential in this environment? I could say it’s through some type of job training or more career opportunities, but it’s just as likely that Carl from Cincinnati is gonna apply for that position at Amazon and get the nod over Jalissa. And eventually, move into Tay Tay’s apartment.
F. Dougie: I think that these are very good questions. I also think that it’s going to take time to see if any of these training programs and jobs help to grow the community, to see if this is help things start to change and to turn around. I’m still a skeptic, but I’m a little further to the right than I was before we really dived into this. Working in the private sector, we both know how important investments like this are in underserved communities (which is probably the impetus for this conversation). My thing though is, O-Zones are not a new idea.
Looking into this a bit further, Margaret Thatcher’s super conservative ass tried this shit in the ’80s in London and called them “Enterprise Zones”. The Clinton Administration tried the same shit in the ’90s and called them “Empowerment zones” (cute, right?) “Give the super-predators the power to empower themselves, Hillary. You’ll see. It’ll work! We’ll look like heroes and meanwhile our corporate donors can save a few Billion in taxes! It’s genius!”
I’mma end with this. Many efforts have been made to look at the effectiveness of these zones. Both in the U.S. (Clinton) and the U.K. (Thatcher). Overall, scholars conclude that so far, that these programs haven’t worked as intended. That they result in tax giveaways for major corporations and pass over the much-needed communities.
In their exhaustive study of 75 enterprise zones in 13 states, Drs. Alan Peters and Peter Fisher, professors of urban and regional planning, found that the tax incentives had
“little or no positive impact on economic growth”. Which again, was my main fear. – Peters and Fisher
Looking at this on the outside, I will concede that it looks like an opportunity to help underserved communities. That is exactly how it is intended to look. BUT, history has shown us otherwise, I have little reason to believe that Black-Republican Tim Scott and his boss Donald Trump are moving quickly to take advantage of O-zones because they intend to help empower communities.
I want to be an optimist and see how this all turns out. Hell, it’ll probably be a decade or so. There is even bi-partisan support in some states…. but the pessimist in me wants to see anyone other than “Cheeto Satan” and his group of republican f#ckbois shepherd this initiative. Maybe we can stall this shit until 2020 at the very least?
Idris Gray: You are right. There have been zones of all kinds. The fact that the word “zones” continue to be used for all these initiatives is funny when you think about it. Especially considering that none of them have proven wildly successful on their own. In fact, the same can be said for Obama’s, yes Obama’s “promise zones”, which worked much like Clintons. I know, downplaying Obama’s efforts is blasphemy, especially during black history month. But this isn’t a slight at Obama,
or Clinton or Trump.
Like you said it all comes down to implementation. Perhaps the Golden One isn’t the right person to push this program. I too will concede that the evidence you’ve given raises questions about the effectiveness. Little economic growth and big breaks for businesses, don’t seem like a good trade-off for displaced peoples. But I will also say that how these programs are implemented is the real secret to success or failure.
“If states select areas that are relatively well off or already gentrifying, most of the benefits will accrue to investors and developers for investments that would have happened anyway.”
The article goes on to elaborate on why the distinction and how these types of programs are implemented is what can really dictate their success.
I still think that the idea of improving areas by incentivizing businesses is at the very least economically sound. But I think if done correctly, it can go much further. People need to be informed of these changes and these tax benefits for corporations so they aren’t blindsided. So that they can make informed decisions about their futures even. Listen. eventually, all neighborhoods will be targeted for expansion, whether through zones or not. I think the question needs to be how can people be empowered to make good decisions for their families and their communities.