New Orleans As the fog clears, I’m going to beat this drum once again about the outrageous scam called Opportunity Zones that were part and parcel of the Trump tax giveaway and in this case were done in the name and off the backs of the poor. My blood was back on boiling about this rip off when it came up in a conversation a week ago with friends in Montana when the conversation slid down into the questionable value of tax credits. It went all over the stove and onto the floor, reading more details in the Wall Street Journal of how this particular piece of undemocratic, privileged sausage was made by Sean Parker of Napster and Facebook fame and riches and his lackeys on both sides of the aisle.
For those with the ability to have forgotten about Opportunity Zones, or who never let his eat up any section of their brain, let me remind. OZs, as their rich fans call them were, as described by David Wessel in the Journal,
Six pages tucked into the sprawling 2017 Tax Cuts and Jobs Act led to the creation of 8,764 of these tax havens across the U.S., ostensibly to lure private capital to poor neighborhoods. Anyone can invest capital gains from a previous investment in a building or business in a census tract designated as an OZ by a state’s governor, defer and reduce taxes on that initial gain, and then pay zero capital gains tax on any profits from that OZ investment, provided that they stick with it for 10 years. Other than holding on to an appreciated asset until you bequeath it to your children, there aren’t many other ways to avoid capital gains taxes altogether. This one has a huge advantage: “You don’t have to die,” says Brad Cohen, a Los Angeles tax lawyer.
Is this inside-the-beltway robbery becoming clearer now?
Worse, unlike even the loosey-goosey way that developers exploit the urban Community Development Block Grant (CDBG) program to finance their dream castles, supposedly to benefit the poor, there isn’t even the semblance of reporting or accountability for OZs to even lie about whether or not they produced any benefit to lower-income families. The scam wasn’t reported or even read, it seems when it was approved, and the facts and fictions of this provision only became clear months after it was tied with a ribbon into the law.
Where has the money gone? Back to Wessel,
A report by a Joint Tax Committee economist found that the $19 billion in OZ investments reported on 2019 tax returns went to just 16% of designated OZs, with 1% of the zones receiving half of the total. OZ money is funding the revival of downtown Erie, Pa., and affordable housing in South Los Angeles, but it is also financing a Ritz Carlton hotel and condo complex in downtown Portland, Ore., and a Virgin hotel in New Orleans. Self-storage facilities, which create hardly any jobs, are sprouting with OZ money. So is luxury student housing in university towns, which are eligible only because college kids show up as poor in census tallies.
This is one of those occasions where you scream, “there ought to be law!” until you remember that there is one, and this is part of it.
Parker greased the skids on this with a million dollars in donations to Republicans and Democrats along with high-level fixers from ranks of both parties. This is the kind of giveaway that made President Trump likely wish he was still hustling real estate projects rather than signing this bill in the White House. Parker claims this was all unintended and can be fixed. He also claims that he hasn’t parked any of his capital gains in this slush pile, but returns are still private, so who knows. We’ll see in ten years, right?
Meanwhile, the harm is still done and the damage continues. President Biden says he is going to make this right, but in the meantime, as usual, the rich get richer, taxes go unpaid, and the poor get squat from all of this.