Opportunity Zones: Big Win for Landowners

The Republican Tax Cuts and Jobs Act of 2017 created 8,700 “opportunity zones” across the country, which receive special capital gains tax breaks. O Zones have divided our cities and towns into winner and loser zones, while encouraging political corruption.O Zones are supposed to alleviate poverty, but the main beneficiaries are likely to be certain landowners within the politically chosen zones. When governments alter the profitability of parcels of land through taxes and regulations, changes in expected future returns are capitalized into current land prices. Markets are forward looking.News articles have highlighted the windfalls that O Zones have bestowed on some lucky landowners, as I noted  here and here. Now a statistical study has confirmed the basic economic logic.  A study by Alan Sage, Mike Langen, and Alex Van de Minne found that O Zone designation has:resulted in a 14% price increase for “redevelopment” properties and a 20% price increase for vacant development sites … Our findings suggest that the OZ program has thus far primarily passed through the statutory tax benefits to existing land owners, with limited evidence of additional value creation.The authors investigated whether there is evidence of increased productivity within O-Zones and spillover benefits to other properties. They find no such effect:If the tax benefit would spur the local economy, one would expect price increases for all properties [in the zones], not just the ones getting th...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs