Subsidy Sheet: New research confirms old research: OZs are a boondoggle
New research confirms old research: Enterprise and Opportunity Zones are still a boondoggle
Experts have known for decades that enterprise-zone-style programs are an extremely ineffective way of creating good jobs. They amount to giant giveaways to corporations and real estate developers, and take funds away from schools and vital public services.
At a seminar hosted by the Brookings Institute in late February, “Opportunity Zones: The Early Evidence,” scholars from around the country came to present their research on the program. Here is what they’ve found:
- OZs likely have no effect on poverty, earnings, or employment.
- Governors are more likely to designate a census tract as an OZ if the tract’s state representative is part of their political party.
- Governors are more likely to designate tracts in areas where they have more donations from executives or firms.
- OZs have virtually no effect on housing prices, researchers say with “95% confidence.”
- OZs have no increase in job vacancies and very limited salary increases.
- Where OZs are leading to an increase in prices, it’s usually “driven by the higher end of the OZ market” – in other words: luxury real estate. This means that lower-income residents receive few benefits.
We’d be remiss if we didn’t point out that some studies show potential benefits from OZs – one study found that OZs have had a slightly positive effect on “non-vacant residential property values.” Another found that in urban (but not rural) areas, OZs experienced employment growth 3 to 4.5% greater than comparable tracts.
But there are several problems with the limited positive studies that have come out regarding OZs – first, none of them come anywhere close to fulfilling the prophecies of former President Trump (“one of the hottest things anyone has ever done with respect to inner cities and with respect to minorities!”). Second, no study has yet managed to justify the price of OZs, which currently cost the federal government $2 billion a year. Even enterprise zones were associated with some investment and jobs – but those benefits were too small to justify the massive tax breaks companies received through the program.
In other words, the current OZ research effectively replicates research that has been going on for decades, showing that enterprise zone job numbers fall far short of projections, tax revenue drops and communities suffer. Lawmakers don’t need to wait for another decade of OZ research – the evidence already shows that the program needs to end.
Opportunity Zone Tax Break Elimination Act in New York State Senate budget
Reinvent Albany was pleased to see the New York State Senate’s budget proposal include the Opportunity Zone Tax Break Elimination Act (see Part QQ), whose passage we, nineteen other orgs and six unions have advocated for some time. If passed, the bill (S1195/A5701 – Gianaris/Dinowitz) would decouple NYS and NYC’s tax codes from the federal Opportunity Zone program, collectively saving up to $100M a year, and much more later. We thank all the advocates who helped make this happen and urge state leaders to include the bill in the final budget.
What we’re reading
- It’s Sunshine Week! In The Hill, fiscal experts Matthew LaFaive and Steve Delie show why corporate subsidies need more sunlight.
- At Boondoggle, Pat Garofalo writes about how subsidies have little impact on company location decisions.
- One of the hottest stories on Subsidy Twitter: In Fort Wayne, Indiana, city councilmembers are set to vote on whether to give a company tax breaks … But they don’t even know the name of the company.
If you got this from a friend, sign up here. Subsidy Sheet is written by Tom Speaker, Policy Analyst at Reinvent Albany. Please send questions and tips to tom [at] reinventalbany.org. We look forward to hearing from you!