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A review by jasonfurman
Only the Rich Can Play: How a Billionaire Sold Washington a Bonanza for the Wealthy as a Way to Help the Poor by David Wessel
5.0
The world is lucky that David Wessel devoted so much time, attention and open mindedness to one particular provision in the tax code, Opportunity Zones, documenting their origin and impact. He has a reporters eye for detail, an ability to tell the story in an exciting way, but also blends in rigorous policy analytics and a certain degree of sympathy and open mindedness--while being willing to make the calls when they are obvious.
Opportunity Zones were a provision in the 2017 that allowed people to take capital gains and instead of paying taxes on them invest them in funds that invested in designated lower-income (sort of) areas with the gains deferred and (they hoped) permanently eliminated it. The idea was the brainchild of Silicon Valley billionaire Sean Parker who established a "think tank" (the Economic Innovation Group), drummed up bipartisan support, and got the idea enacted in record time in the 2017 tax cut. The bad press quickly mounted as many gentrifying and even rich areas were designated Opportunity Zones, connected people started profiting, and funds appeared to be going into expensive hotels, storage facilities and college dorms.
As someone that has worked on economic policy, both reporting and from within Brookings, Wessel brings a lot of insight into how ideas are fleshed out and defended. In some ways he is appropriately cynical, but in other ways he shows the ways in which the idea was, at least in part, well intentioned by its developers, promoter and legislators (and Parker himself does not appear to have profited at all from it). He does make the think tank policy industry sound a little more cynical than it deserves, I would also love to read a book on how the idea of a child allowance went from pipe dream to reality rapidly in part through think tanks and research in a manner that has some similarities but many differences from Opportunity Zones.
The first part of the book filled in a few holes in my knowledge (including some great stories, like Tim Scott in the Oval Office after Charlottesville using the opportunity to push President Trump on Opportunity Zones). But it got more interesting the second part where Wessel goes through the quirks of the process by which Treasury rapidly wrote rules on Opportunity Zones and the States implemented them with mixed results along with the many weirdnesses, quirks, accidents and malevolence that went into the process. Then he goes off to Portland, Baltimore and other places to examine project, finding that most of them would have happened anyway, did not appear to serve any particularly worthwhile goal, but in a few cases may have been consistent with the intention.
These anecdotes would be a wonderful complement to rigorous causal research, unfortunately there is none and given the paucity of data there may never be. But he cites evidence that Opportunity Zones have not raised housing prices, most did not get anything like the initial hype or even get anything at all, and most of the money went to gentrifying ones. All in all, the combination of anecdotes and evidence leaves one wondering whether a small fraction of the cost went to good or none of the cost went to good.
At the end of the day my own deep policy conviction is to be extremely skeptical of place-based policies and extremely skeptical of indirect policies that gives financial incentives to businesses or high-income people to do good things for others. The problem with place-based policies is they often do not benefit those in most need but property owners and in practice can be implemented in a highly politicized manner because nothing is more powerful for politicians than places. And then there is a parade of policies that are about indirectly giving incentives through corporations or high-income households to achieve goals (like the repatriation holiday), almost all of which beg the question of why not use the federal resources directly for whatever the purpose was.
A big advantage of giving money to people rather than places or high-income households is that it is hard to go badly wrong. If the government had spent the money on housing vouchers, for example, we might debate the finer points of whether they were optimally designed (e.g., whether and how to encourage mobility to high opportunity areas) but there would not be any doubt that the resources went to their intended purposes. Instead we are left with a triple bank shot of a policy that may have delivered a little to people who needed it while letting the most affluent take a huge cut.
Overall, a great case study in how Washington works, how tax policy works, and some of the challenges around promoting economic development through the tax code--highly recommended.
Opportunity Zones were a provision in the 2017 that allowed people to take capital gains and instead of paying taxes on them invest them in funds that invested in designated lower-income (sort of) areas with the gains deferred and (they hoped) permanently eliminated it. The idea was the brainchild of Silicon Valley billionaire Sean Parker who established a "think tank" (the Economic Innovation Group), drummed up bipartisan support, and got the idea enacted in record time in the 2017 tax cut. The bad press quickly mounted as many gentrifying and even rich areas were designated Opportunity Zones, connected people started profiting, and funds appeared to be going into expensive hotels, storage facilities and college dorms.
As someone that has worked on economic policy, both reporting and from within Brookings, Wessel brings a lot of insight into how ideas are fleshed out and defended. In some ways he is appropriately cynical, but in other ways he shows the ways in which the idea was, at least in part, well intentioned by its developers, promoter and legislators (and Parker himself does not appear to have profited at all from it). He does make the think tank policy industry sound a little more cynical than it deserves, I would also love to read a book on how the idea of a child allowance went from pipe dream to reality rapidly in part through think tanks and research in a manner that has some similarities but many differences from Opportunity Zones.
The first part of the book filled in a few holes in my knowledge (including some great stories, like Tim Scott in the Oval Office after Charlottesville using the opportunity to push President Trump on Opportunity Zones). But it got more interesting the second part where Wessel goes through the quirks of the process by which Treasury rapidly wrote rules on Opportunity Zones and the States implemented them with mixed results along with the many weirdnesses, quirks, accidents and malevolence that went into the process. Then he goes off to Portland, Baltimore and other places to examine project, finding that most of them would have happened anyway, did not appear to serve any particularly worthwhile goal, but in a few cases may have been consistent with the intention.
These anecdotes would be a wonderful complement to rigorous causal research, unfortunately there is none and given the paucity of data there may never be. But he cites evidence that Opportunity Zones have not raised housing prices, most did not get anything like the initial hype or even get anything at all, and most of the money went to gentrifying ones. All in all, the combination of anecdotes and evidence leaves one wondering whether a small fraction of the cost went to good or none of the cost went to good.
At the end of the day my own deep policy conviction is to be extremely skeptical of place-based policies and extremely skeptical of indirect policies that gives financial incentives to businesses or high-income people to do good things for others. The problem with place-based policies is they often do not benefit those in most need but property owners and in practice can be implemented in a highly politicized manner because nothing is more powerful for politicians than places. And then there is a parade of policies that are about indirectly giving incentives through corporations or high-income households to achieve goals (like the repatriation holiday), almost all of which beg the question of why not use the federal resources directly for whatever the purpose was.
A big advantage of giving money to people rather than places or high-income households is that it is hard to go badly wrong. If the government had spent the money on housing vouchers, for example, we might debate the finer points of whether they were optimally designed (e.g., whether and how to encourage mobility to high opportunity areas) but there would not be any doubt that the resources went to their intended purposes. Instead we are left with a triple bank shot of a policy that may have delivered a little to people who needed it while letting the most affluent take a huge cut.
Overall, a great case study in how Washington works, how tax policy works, and some of the challenges around promoting economic development through the tax code--highly recommended.