Republicans badly want to use Opportunity Zones to show voters they care about poor people. But problems with the program’s image —and execution — are making that difficult.
Democrats, who represent areas that could be helped by the program, also want Opportunity Zones to succeed. But they face criticism for being too sympathetic to an initiative Republicans largely authored.
And Republicans are having to defend a program that is battling perceptions it’s a hastily-conceived handout to rich people.
Critics warn the program, which is still largely in the implementation stage, is designed to give tax breaks to real estate developers and make the wealthiest investors even wealthier.
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Those concerns were bolstered this week by reports that Trump, his son-in-law and senior adviser Jared Kushner and Trump’s close friend Richard LeFrak all had business interests in designated Opportunity Zones.
Ivanka Trump, another White House adviser and Kushner’s wife, was one of the most vocal proponents of Opportunity Zones inside the White House.
Sen. Tim Scott, R-South Carolina, the program’s congressional champion, appeared frequently with Ivanka Trump last year to tout the Republican tax bill, which included the zones. The idea came from Scott’s Investing in Opportunity Act, which provides tax incentives to anyone making a long-term investment in certain economically ravaged areas.
On Thursday afternoon, as he headed to a Capitol Hill meeting where Treasury Secretary Steven Mnuchin was making himself available to answer questions about Opportunity Zones for Senate Republicans, Scott dismissed criticism about how Kushner and Ivanka Trump’ can benefit from the program.
“I think out of all the benefits that will enure to the benefits of the communities, to have a discussion about one or two individuals is not something I’m interested in,” Scott told McClatchy.
“The fact of the matter is we are talking about investments that will exceed $100 billion in 87 districts created (through zones designated) by governors” — investments, Scott said, Kushner and Ivanka Trump “had nothing to do with. With input from mayors they had nothing to do with, from legislation they had nothing to do with.”
Other concerns have been magnified in recent days, specifically that there aren’t enforcement mechanisms written into the law to ensure the neediest communities are being targeted.
This controversy was reinforced by news that Amazon has chosen to open new headquarters in Long Island City, Queens.
Though Amazon hasn’t given indication yet it will try to take advantage of the Opportunity Zone tax incentives, critics say it shouldn’t be rewarded with tax breaks for investing in a rapidly-gentrifying area. Yet the neighborhood is eligible to be an Opportunity Zone, according to U.S. Census data. The area was, in fact, selected as one of 514 in New York State, based on recommendations by Democratic Gov. Andrew Cuomo.
“It’s not been fleshed out. It picks winners and losers,” Rep. Jim Clyburn of South Carolina, the third ranking House Democrat, said recently of Opportunity Zones.
Clyburn favors his own anti-poverty proposal which would require 10 percent of federal funding go to “persistent poverty” counties where 20 percent of the population has lived under the poverty line for 30 years or more.
Republicans are latching onto Opportunity Zones in part because it’s a perfect fit for the party’s philosophy.
The program lets the private sector, rather than the government, do the work and provide the money. They also praise how local leaders get the most discretion in choosing Opportunity Zones, a nod to the party’s preference for empowering states rather than handing down dictates from Washington.
And for President Donald Trump, who continues to struggle to make inroads with minorities, it’s a political boost if he can embrace a program conceived by Scott, the Senate’s only black Republican.
“Governors know their local needs best,” Trump said at the White House on Wednesday at an event to celebrate the creation of a new “Opportunity and Revitalization Council” that will direct federal resources to bolster the program. “America’s governors designated nearly 9,000 neighborhoods as Opportunity Zones ... so that all Americans, regardless of zip code, have access to the American dream.”
For Sen. Cory Booker, D-New Jersey, who didn’t vote for the tax bill but co-sponsored the original legislation creating Opportunity Zones, the success of the program could be tied to his political future. He is eying a run for president in 2020.
“Come to my community and tell me you want to stop legislation that is going to make a difference to low-income folks in America,” said Booker, the former mayor of Newark, New Jersey.
Booker, a supporter of Clyburn’s plan, dismissed concerns about Opportunity Zones benefiting investors.
“Is the developer doing this as an act of charity? No. But in areas of our country that are starved for capital ... this will probably be the largest economic development bill for low-income areas in half a century,” Booker said.
Scott said Thursday concerns about the lack of reporting standards for Opportunity Zones would also soon be addressed. The original Investing in Opportunity Act had an accountability requirement but it had to be removed when the act was inserted into the Republican tax bill in order to comply with procedural rules.
The new White House council, said Scott, was discussing how to implement such standards retroactively. And the Treasury Department is still in the process of writing regulations that will govern some of the program.
Since first introducing the Investing in Opportunity Act in 2016, Scott has linked his personal brand to the initiative’s success. In the past year since it was included in the tax bill, Scott has traveled around the country on an “Opportunity Tour,” even going to early primary states like Iowa and New Hampshire to visit designated zones and meet with community and business leaders.
Steve Benjamin, the Democratic mayor of Columbia, South Carolina, is one elected official who has spoken to Scott frequently about Opportunity Zones.
The current president of the U.S. Conference of Mayors, Benjamin said over the summer the program, despite some flaws, has the potential to help his city and state. So far, nearly 70 percent of designated Opportunity Zones represent areas that “severely distressed” — and something is better than nothing.
“Any opportunity we have to direct capital towards areas of greatest need is a great challenge to have,” Benjamin said. “It’s certainly not perfect, but it’s a chance to make a real impact in various regions across the country. I’m excited about it.”