The economic slowdown caused by the coronavirus pandemic is stifling a federal program meant to spur new investment in low-income neighborhoods, according to a new survey from an advocacy group that backs the initiative.
The Economic Innovation Group surveyed more than 100 investors and other people involved in "opportunity zones," designated areas that offer tax incentives for investment. Created by the 2017 tax cut law, the zones are aimed at attracting money and new businesses to poor communities.
But the pandemic is putting some of that investment activity on hold, according to the survey of investors, opportunity zone fund managers and other people associated with the zones.
The Economic Innovation Group found that 52% of respondents say the pandemic is having a "negative impact" on their activities. About 71% said that potential investors are still interested in the areas but are hesitant to commit as a result of the current economic uncertainty.
My Admin has done more for the Black Community than any President since Abraham Lincoln. Passed Opportunity Zones with @SenatorTimScott, guaranteed funding for HBCU’s, School Choice, passed Criminal Justice Reform, lowest Black unemployment, poverty, and crime rates in history…— Donald J. Trump (@realDonaldTrump) June 2, 2020
Opportunity zones are a cornerstone of President Trump's reelection pitch to African Americans. In the wake of the pandemic, Trump has pledged to help minority communities that have been disproportionately affected by the virus.
The survey comes as the White House considers seeking an extension of the program, which currently allows investors to defer and lower their capital gains taxes through 2026.
Some 64% of the Economic Innovation Group's survey respondents backed pushing the tax break out beyond 2026.
"This is a time for policymakers to strengthen the policy and ensure it can serve as a tool for economic resiliency and recovery," the Economic Innovation Group said in a statement, urging Congress to act.
Questions remain about the full impact of these zones. Critics argue the tax incentives have done more to help rich investors than local residents. There are no federal reporting requirements that would allow the public to track these tax breaks.
A study released last week by the Urban Institute found that while some communities have benefited from the zones, much of the investment is going into real estate and not into operating businesses that would create jobs. The study concluded that the structure of the tax break favors the most profitable projects, not necessarily those that would have greatest social impact.