Subsidy Sheet: OZ Extension Just One of Trump Budget Provisions That Could Cost NY Billions

The One Big, Beautiful Bill Act was signed into law by President Trump on July 4, promising sweeping changes to government taxation and spending with ramifications that could last decades.

Hedy Yang from the American Economic Liberties Project took a look for Boondoggle at likely consequences of the provision making Opportunity Zones permanent, and the details are eye-opening: 

• A staggering 84 percent of all OZ funding in the program’s first two years went to the top 10 percent of projects, and those that received the most money also had the most affluent and educated populations.
• Half of all OZ districts received no funding at all. And a provision allowing 10 percent of investments to be made outside of an OZ meant $2.1 billion in OZ investments in 2019 alone weren’t even in districts designated as in need of development.
• Most districts that did receive investments were in areas already seeing an economic upturn, suggesting investors were putting money into projects they would have anyway. Other investors shifted funds from projects outside OZ districts to those inside, or lobbied local officials to move district boundaries so their preferred projects would be eligible for tax breaks.
• The sector receiving the largest share of OZ funds was luxury housing, something the NYU Furman Center also noted last month.

Because the feds limit how much data is publicly available on OZ spending, it’s hard to know what other revelations might be hiding in the full numbers. Unfortunately, the rewritten Opportunity Zone law maintains huge loopholes that, as documented by Good Jobs First, make some apparent improvements functionally meaningless (one small silver lining: The bill did include reporting requirements for OZs, contrary to everyone’s expectations). In a July 10th statement, Reinvent Albany once again called on New York’s Governor Hochul and Assembly Speaker Heastie to join Senate Leader Stewart-Cousins’ efforts to unlink New York’s tax code from the federal code before the state and NYC lose billions in tax revenue to out-of-state Opportunity Zone investment schemes. 

Trump’s budget, meanwhile, promises many other sweeping consequences, including:

• Medicaid funding cuts to states will punch “a multi-billion dollar hole in the current [New York] state budget,” reports THE CITY, and will likely lead to a special legislative session on how to close it. The Fiscal Policy Institute predicts this will “throw the state into an immediate fiscal crisis, cause millions of New Yorkers to lose insurance coverage while closing down community hospitals, and likely force the state to raise taxes.”
• Owners of private jets will once again be able to deduct the planes’ entire cost as a business expense in the year of purchase, something that cost the federal treasury an estimated $67 billion for just the 25 corporations that benefited the most from 2018 to 2022, when the tax break was last in place. If New York State wants to recoup some of that public money flowing to corporate high flyers, it could consider reinstating sales taxes on private jet sales — there’s a bill waiting in the legislature that would do just that.
• The new law cancels a $30 million grant for new streets, parks, bike paths, lighting, sidewalks, trees, and recreation areas in a Syracuse neighborhood set to replace the soon-to-be-torn down elevated section of I-81. With no alternative source of funding identified, the city will either be forced to scale back its plans to undo the effects of the highway — which destroyed a working-class Black neighborhood in the late 1950s — or seek cuts in other programs.

Federal tax credits for computer chip factories will rise from 25 percent of the cost of building new factories to 35 percent. The original credits, included in the 2022 CHIPS and Science Act, have already cost the federal government billions of dollars for companies like Micron, which have doubled down by seeking billions more in tax breaks from New York and other states.

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Other subsidy news from the past week:

• California State University, Sacramento political science professor Kim Nalder in the Times on those inflated film tax credits that California Gov. Gavin Newsom just signed into law: “Most Democrats would oppose a major reduction in the amount of taxes that the state’s bringing in, especially right now. But they want to support L.A., they want to support Hollywood, they’re concerned about the fire damage in the state. And then, you know, Hollywood’s a lot sexier than workers’ compensation or in-home health care.” Brennen Dicker of the Georgia Chamber of Commerce is already talking about keeping film productions from going overseas with an “incentive nationally that we can present to the folks in DC.”
• If you’re looking for further explanation of why data centers  are costing states billions of dollars for no real benefit, Boondoogle has got you covered.

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