What we have here is a privatization land grab that makes the dissolution of the Soviet Union look trivial. Essentially, already deprived cities and rural areas are being sold as sovereign wealth...
What we have here is a privatization land grab that makes the dissolution of the Soviet Union look trivial. Essentially, already deprived cities and rural areas are being sold as sovereign wealth funds with extra sweet tax breaks on top.
Not only is it yet another way to exploit people too poor to move, who are already being monetized through payday loans, private prisons, wage theft, charter schools, excessive rents, and corrupt government, they'll now be privileged to live in hedge-fund managed tracts without any pretense of democratic local governance.
This is not going to end well.
(This is the Forbes news story I was looking for earlier.)
"Wage theft" refers to a set of largely illegal practices on the part of employers: inaccurate recording of hours worked, overtime labor without premium payment, uncompensated time required for...
"Wage theft" refers to a set of largely illegal practices on the part of employers: inaccurate recording of hours worked, overtime labor without premium payment, uncompensated time required for performance of job duties (e.g. changing contaminated clothing, traveling between locations on premises, security searches, etc.).
Hourly service workers are especially vulnerable, and that's most of the working population in depressed urban/rural sacrifice zones. Of late, there's been virtually no enforcement.
That was your honest read of this? Your summary seems hyperbolic at best and downright disingenuous at worse. What is proposed is not much different from what every city and state does in the U.S....
That was your honest read of this? Your summary seems hyperbolic at best and downright disingenuous at worse.
What is proposed is not much different from what every city and state does in the U.S. to attract business to their area. This is just ramping up those benefits and tying the benefits to companies who relocate to poor areas. This sounds like a good capitalist solution to me.
It was not intended as a summary, but rather a 100-word very heated hot-take on the way out the door this morning. You have my apologies, as it relies on facts not yet in evidence. At a macro...
It was not intended as a summary, but rather a 100-word very heated hot-take on the way out the door this morning. You have my apologies, as it relies on facts not yet in evidence.
At a macro level, I'm not denying a substantial possible upside from repatriating a potential sum of $6.1 trillion in capital gains which would otherwise not be realized in the U.S. for tax reasons, and this Act avoids the moral hazard of an outright tax holiday.
At a micro level, here's the more detailed critique of the legislation. (I'm not going to dispute libertarian or anarchist ideological principles; I'm trying to keep this in the realm of politics and economics as they are now.)
The zones are certified by the U.S. Department of Treasury, not by any agency which may be aware of genuine needs and/or able to scrutinize real impacts to the community. The qualification requirements for "Opportunity Zone" designation and fund certification are minimal, and in no way intended to define a measurable economic outcome for the areas designated.
The opportunity to realize gains by entities outside the Opportunity Zone is generous, to put it mildly (e.g. up to 6.1 trillion dollars eligible for breaks), which may contribute to inequality concerns rather than ameliorating them. There is no requirement to continue investment or reinvest once investment reaches a very medium-term maturity - 10 years to reach no owed tax, and full untaxed profit on sale of the investment.
"Opportunity Zones" are proposed solely by state governors. This is an autocratic process without input or scrutiny of the evaluation process from the state legislature or local communities, and therefore susceptible to cronyism, undue financial or partisan influence, and subtle or overt racism.
At best, this is government choosing winners and losers, hardly a good "capitalist" undertaking.
At worst, this is a way for governors to override local governance, reinforce already racist resource allocation, reward supporters, and punish communities which don't give electoral support to the current regime.
[More notably, the city of Flint, Michigan, which suffered one of the most preventable public health disasters in modern memory in addition to economic devastation, has designated Opportunity Zones drawn outside the worst contaminated and poorest areas.]
There are many details left to the Devil - how funds enforce and protect their owner/investor stake, for instance. This can cut both ways - there are means for activist residents to constructively oppose development they don't like, which can prove very costly for developers. Given the open-ended nature of who can invest in a fund and its investment choices, it's not impossible for a fund to become a majority property owner and charge extortionate rents, or send a private security force to clean out the riff-raff, or declare that no union employees will be hired in any business it supports.
As indicated above and elsewhere, this is very different from how cities ordinarily cultivate and court investors. There's also the possibility for Opportunity Zone Funds to create investment tranches with all the unprotected bells and whistles that led to derivatization and collapse of the housing market, or otherwise unforeseen hazards that could arise outside the regulatory oversight of the SEC.
While my intro was hyperbolic, there's a long list of historical reasons to distrust the outcome of this process.
So that's a LOT different than your intro. If I were only to read the intro I'd think that the government was giving away land to companies and charging residents rent, which isn't based in...
So that's a LOT different than your intro. If I were only to read the intro I'd think that the government was giving away land to companies and charging residents rent, which isn't based in reality at all!
I read two main criticisms in your reply:
The program as outlined is not perfect and not a panacea for poverty
Gentrification and exclusion of existing residents
I think #1 is specious at best. Much of your criticism is general and is centered on attacking claims not made by the plan ("not a strategy" - who said it was a strategy to deal with poverty across the board? "details left to the Devil" - who said this was 100% complete?).
To be clear, it's totally fair to criticize the plan. It's not perfect and could be better, even by changing some of the things you said. But let's not pretend it's something it's not, and for the areas that do get selected, it could be a big benefit. There's enough outrage going around already - no need to whip up a reaction to something that is mostly good.
Number two holds more water IMO. I can't imagine that putting in a tech hub is going to provide a lot of employment for drug addicts and folks with mental health problems. I'd like to see a change where these companies are setting something aside to fund shelters/rehabs in those same or nearby areas.
How's this - I sincerely hope you're right, and that everything works to everyone's benefit. There's a great deal of history, public policy study and economics that suggest my pessimistic...
How's this - I sincerely hope you're right, and that everything works to everyone's benefit.
There's a great deal of history, public policy study and economics that suggest my pessimistic expectations of this law will be proven correct. I genuinely don't have time to explore all of it with you, and wish you the best.
Now I remember one of the bits that really tripped my alarm bells for this Act - it's essentially replacing a existing targeted programs (Low Income-Targeted Housing, New Markets credits,...
Now I remember one of the bits that really tripped my alarm bells for this Act - it's essentially replacing a existing targeted programs (Low Income-Targeted Housing, New Markets credits, historical preservation) that cities have come to rely on, with no guarantee that the new fully privatized funds will have the same effects or achieve the same spending levels. It's enormously disruptive to projects already in motion.
What we have here is a privatization land grab that makes the dissolution of the Soviet Union look trivial. Essentially, already deprived cities and rural areas are being sold as sovereign wealth funds with extra sweet tax breaks on top.
Not only is it yet another way to exploit people too poor to move, who are already being monetized through payday loans, private prisons, wage theft, charter schools, excessive rents, and corrupt government, they'll now be privileged to live in hedge-fund managed tracts without any pretense of democratic local governance.
This is not going to end well.
(This is the Forbes news story I was looking for earlier.)
Butt....buttt....trickle down?
That article nothing but a bunch of spun sugar and cheerleading.
I have never heard of wage theft?
"Wage theft" refers to a set of largely illegal practices on the part of employers: inaccurate recording of hours worked, overtime labor without premium payment, uncompensated time required for performance of job duties (e.g. changing contaminated clothing, traveling between locations on premises, security searches, etc.).
Hourly service workers are especially vulnerable, and that's most of the working population in depressed urban/rural sacrifice zones. Of late, there's been virtually no enforcement.
Ah, never knew it had a term. Thanks
That was your honest read of this? Your summary seems hyperbolic at best and downright disingenuous at worse.
What is proposed is not much different from what every city and state does in the U.S. to attract business to their area. This is just ramping up those benefits and tying the benefits to companies who relocate to poor areas. This sounds like a good capitalist solution to me.
It was not intended as a summary, but rather a 100-word very heated hot-take on the way out the door this morning. You have my apologies, as it relies on facts not yet in evidence.
At a macro level, I'm not denying a substantial possible upside from repatriating a potential sum of $6.1 trillion in capital gains which would otherwise not be realized in the U.S. for tax reasons, and this Act avoids the moral hazard of an outright tax holiday.
At a micro level, here's the more detailed critique of the legislation. (I'm not going to dispute libertarian or anarchist ideological principles; I'm trying to keep this in the realm of politics and economics as they are now.)
"The requirements to qualify as a QOZ Fund appear very limited. The Fund must be a corporation or partnership with a purpose of investing in Qualified Opportunity Zone Property (“QOZP”). This purpose requirement can likely be satisfied by having fund organizational documents provide for such a purpose. While the Joint Explanation that accompanied the Tax Reform bill indicated that there would be a similar certification process as with New Markets Tax Credits, the actual statute does not indicate such a process is required. Informal discussions with Treasury personnel also indicate that the Treasury certification process will not be extensive."
On the plus side, the Treasury Department has substantial scope to regulate abuses, if the knowledge and political will is available.
"Under the new law, however, those investors can defer paying capital gains taxes for years if they reinvest their profits in an Opportunity Zone. If they hold that investment for seven years, they get a 15% reduction on the original capital gains tax. If they hold it for 10 years, moreover, they won’t have to pay any tax at all on the profits generated from the Opportunity Zone. For a successful investment, that would add up to a major tax saving."
Initial results show some states made little effort to prioritize the most distressed or impoverished areas of those eligible, and most states tended to favor areas where home prices were already appreciating. A significant fraction are not low-income by any measure.
As an example, Opportunity Zones designated for the city of Detroit, while in an indisputably needy metropolitan area, are allocated to Indian Village, Midtown, Rosedale and East English Village, all of which are predominately white, comparatively wealthy or already growing enclaves in the midst of devastation.
Also.
Michigan has a long history of covert state policy-making with intentionally disparate impact by race, and there's been little evidence of change. Its Opportunity Zones have been drawn to once again reinforce the old maps.
At best, this is government choosing winners and losers, hardly a good "capitalist" undertaking.
At worst, this is a way for governors to override local governance, reinforce already racist resource allocation, reward supporters, and punish communities which don't give electoral support to the current regime.
[More notably, the city of Flint, Michigan, which suffered one of the most preventable public health disasters in modern memory in addition to economic devastation, has designated Opportunity Zones drawn outside the worst contaminated and poorest areas.]
Opportunity Zones are not a strategy. The mere existence of an Opportunity Zone in a rural distressed area is no guarantee that it has anything desirable to invest in. Conversely, selecting for "investibility" can lead to gentrification and exclusion of the existing residents.
There are many details left to the Devil - how funds enforce and protect their owner/investor stake, for instance. This can cut both ways - there are means for activist residents to constructively oppose development they don't like, which can prove very costly for developers. Given the open-ended nature of who can invest in a fund and its investment choices, it's not impossible for a fund to become a majority property owner and charge extortionate rents, or send a private security force to clean out the riff-raff, or declare that no union employees will be hired in any business it supports.
As indicated above and elsewhere, this is very different from how cities ordinarily cultivate and court investors. There's also the possibility for Opportunity Zone Funds to create investment tranches with all the unprotected bells and whistles that led to derivatization and collapse of the housing market, or otherwise unforeseen hazards that could arise outside the regulatory oversight of the SEC.
While my intro was hyperbolic, there's a long list of historical reasons to distrust the outcome of this process.
So that's a LOT different than your intro. If I were only to read the intro I'd think that the government was giving away land to companies and charging residents rent, which isn't based in reality at all!
I read two main criticisms in your reply:
I think #1 is specious at best. Much of your criticism is general and is centered on attacking claims not made by the plan ("not a strategy" - who said it was a strategy to deal with poverty across the board? "details left to the Devil" - who said this was 100% complete?).
To be clear, it's totally fair to criticize the plan. It's not perfect and could be better, even by changing some of the things you said. But let's not pretend it's something it's not, and for the areas that do get selected, it could be a big benefit. There's enough outrage going around already - no need to whip up a reaction to something that is mostly good.
Number two holds more water IMO. I can't imagine that putting in a tech hub is going to provide a lot of employment for drug addicts and folks with mental health problems. I'd like to see a change where these companies are setting something aside to fund shelters/rehabs in those same or nearby areas.
Have a super awesome day!
How's this - I sincerely hope you're right, and that everything works to everyone's benefit.
There's a great deal of history, public policy study and economics that suggest my pessimistic expectations of this law will be proven correct. I genuinely don't have time to explore all of it with you, and wish you the best.
Finally something we can agree on ;-P
Now I remember one of the bits that really tripped my alarm bells for this Act - it's essentially replacing a existing targeted programs (Low Income-Targeted Housing, New Markets credits, historical preservation) that cities have come to rely on, with no guarantee that the new fully privatized funds will have the same effects or achieve the same spending levels. It's enormously disruptive to projects already in motion.
https://urbanland.uli.org/capital-markets/new-u-s-tax-law-affects-community-development-projects/