Research

Co-authors: Bruce Katz, Jeremy Nowak, Jamie Rubin, Dan Berkovits

The Tax Cuts and Jobs Act of 2017 provides a new incentive—centered around the deferral of capital gains taxes—to spur private investments in low-income areas designated as Opportunity Zones. Given the significant interest among investors, it is possible that this new tax incentive could attract tens of billions of dollars in private capital, making this one of the largest economic development initiatives in U.S. history.

Download How States Can Maximize Opportunity Zones

Faced with supersized economic, social and environmental challenges over which the US federal government and several states have long abdicated responsibility, new models of local governance are now crucial. This is the core contention addressed in our recent book, The New Localism: How Cities Can Thrive in the New Age of Populism.

With major distractions in national governments both in the US and UK, it is up to cities to deal with real and practical challenges.

Three necessary steps for Brexit to spark true societal reform that empowers cities and regions.

As Brexit negotiations enter a delicate phase, it is urgent to think about innovative ways in which Britain can strengthen its economic position while staying true to the political imperative to “take back control” from the European Union. The answer lies in more radical and far-reaching efforts to realise the market and civic potential and leverage the distinctive competitive advantages of U.K. cities and regions.

In February 2017, I visited London for an Inclusive Growth Forum sponsored by the Rowntree Foundation and the Royal Society for the Arts. I had just started writing a book, The New Localism, with Jeremy Nowak to chronicle the structural shift in the way we solve problems in the 21st century: bottom-up rather than top down (led by cities), multi-sectoral rather than exclusively government (driven by networks) and interdisciplinary rather than specialized (drawing from diverse expertise and experiences).

Author and academic Bruce J. Katz, who also served in the first Obama administration as a senior adviser in Housing and Urban Development, explains the concept of New Localism, and how cities and towns must work collaboratively with innovators to deliver products and services that users really want.

The Tax Cuts and Jobs Act of 2017 established an Opportunity Zones tax incentive, which provides a federal capital gains tax deferral and partial exemption for investments in designated Opportunity Zones. Governors in each state will select Opportunity Zones from an eligible group of low-income census tracts. Selections must be made by the third week of March 2018 (or third week of April 2018 if an extension is requested). Given the significant interest among many private investors, it is possible that Opportunity Funds will attract tens of billions of dollars in private capital, making this one of the largest economic development programs in U.S. history.

This policy brief puts forward four principles to guide the selection and development of Opportunity Zones. The principles are designed to enable the greatest job creation potential and the most significant advantages for lower income resident employment, both, inside and outside the eligible zones. Throughout the document we stress the use of data analytics, local knowledge, and the need to see these incentives as just one part of a broader economic development strategy.

In the mid-to-late 1980s, Copenhagen was experiencing a 17.5 percent unemployment rate, a loss of taxing capacity, and an annual budget deficit of $750 million. For decades, government policies had subsidized the outmigration of families to the outskirts of Copenhagen, leaving a city overrepresented by pensioners and college students, neither of whom contributed greatly to the city’s tax revenue. With a stagnant economy and the traditional manufacturing industry moving out, the city government had to do something radical to spur economic growth and attract a strong tax base.

The coming of a new year is a time for reflection and focus. While New Year’s resolutions are traditionally the province of individuals, 2018 requires collective thought and purpose at the communal level.

Populist spasms in the United States and Europe and the abdication of responsibility by higher levels of government have devolved new burdens to cities, often without the concomitant delegation of capacity or resources. The complex nature of economic, social and environmental challenges today have also elevated cities because their leaders think and act across disciplines and sectors rather than in bureaucratic compartments and specialized silos.

Across the world, cities are grappling with climate change. While half of the world’s population now lives in cities, more than 70 percent of carbon emissions originate in cities. The 2015 Paris Climate Agreement, the UN’s 2016 Sustainable Development Goals, and the recent UN Climate Change Conference in Bonn, Germany have all recognized that cities will need to be a key part of the world’s response to climate change.