A Tax Break to Help Poor Communities Became a Bonanza for the Rich

This was an interesting read. To me it illustrates what a blunt instrument the federal government is, and how difficult it is to craft a good national tax incentive.

This reminds me very much of the lead up to the S&L crisis in the 1980's, fueled largely by the use of real estate as a tax shelter. A lot of real estate "investments" were made that didn't make any sense as real estate, because they didn't need to. Money-losing real estate projects were netting a profitable tax outcome for certain kinds of wealthy people.

The opportunity zone program sounds nice on paper, and as the article explains the majority of places that qualify are the kind of place that would welcome just about any investment. Suppose the bill had been crafted perfectly, and only genuinely economically struggling places qualified, you would expect to see a lot of the very wealthy start taking hard looks into these places to see if they could figure out ways to turn a profit investing in them. That activity would probably be beneficial.

But the bill was not (IMO could not have been) crafted perfectly. Whether you interpret it as an unintended side effect or intentional cronyism, little pockets of economically vibrant land made it into these "opportunity zones," and of course the ability to make tax-free investments in a prosperous location will attract a firehose of money.

The article supposes that after these "low hanging fruit" in the opportunity program have mostly been taken, that more challenging investments in the places that were really intended may follow. But I wonder if the program will last that long, or, if as it so often happens, this kind of bad money rushing into real estate will turn out to be one of the triggers for the next recession.