Buried within the more than 500 pages of Donald Trump’s 2017 tax cut was an unobtrusive line item with potentially damaging consequences. Proposed by Senator Tim Scott of South Carolina, the provision allows governors to select certain census tracts in their states, in economically distressed areas, as “opportunity zones.” The Treasury certified the last of these zones in June, bringing the total number to 8,700. Now, investors who fund projects in these areas will get sizable tax breaks—even on unrelated investments. As long as they dump profits into a fund earmarked for the opportunity zones, they can defer or even eliminate the capital gains they would otherwise have owed.

Some of the census tracts that have been identified as opportunity zones may be truly distressed. But it’s dubious whether others should qualify—this summer, for example, much of Long Island City in New York was named an opportunity zone. Now that Amazon has announced it’s moving one of its two HQ2 branches there, the retail behemoth could nab a $225 million tax break simply because the site happens to fall in one such zone—this, on top of the $1.7 billion New York has already offered Amazon. Investors who purchase apartment buildings for the influx of tech employees will also see tax breaks. So will anyone building office parks, or grocery stores. That money may well be better spent elsewhere, but during the debate over the tax bill, such questions received very little attention. Neither, really, did the zones themselves. Since its passage, though, President Donald Trump has enthusiastically promoted the plan, issuing press releases boasting that “new investment will flow into blighted developments, stalled infrastructure projects, and other desperately needed economic enhancements” and create fiscal improvements that will “help turn dreams to reality.”

The thinking behind the zones reflects Republican faith in privatization as a cure-all. If Trump has departed from conservative orthodoxy on trade and entitlements, he is squarely with the party when it comes to this issue. On the campaign trail, he promised to spend $1.5 trillion on the country’s infrastructure, but when the details of his plan were released a month before the election, it was merely a proposal to privatize roads, bridges, and waterways. Trump has similar plans for the nation’s air traffic control system, the Department of Veterans Affairs, and even the Postal Service. Each one offers huge upsides for a select group of financiers and business owners, but does little to nothing for the American people.

None of these promises has fully gone into law—apart from opportunity zones, the first of which the Treasury implemented this spring. Since then, a number of funds have cropped up to cash in on the boom. Anthony Scaramucci, who served as Trump’s director of communications for all of ten days, plans to launch a $3 billion “opportunity fund” at his hedge fund Skybridge Capital. Cadre, the real estate crowdfunding platform partially owned by Jared Kushner and his brother, Joshua, is also focused on exploiting the zones. As Charles Clinton, the CEO of EquityMultiple, a real estate investment startup, said in September, they are “one of the biggest real estate investment opportunities in decades.”



Similar efforts have been undertaken in the past. In the 1980s, Margaret Thatcher created eleven “enterprise zones” in the United Kingdom, which produced fewer jobs than promised. Each cost the government between $35,000 and $45,000, indexed for inflation. The areas are still home to some of the poorest people in the country. During the 1990s, Bill Clinton set up 104 “empowerment zones” in six urban areas around the United States, including Atlanta, Baltimore, and New York, as well as three rural areas, in Kentucky, Mississippi, and Texas. Clinton’s plan (unlike Trump’s) tried to encourage not just capital investment, but also hiring and upfront investments in equipment. But research on empowerment zones has found that they had little to no effect on economic growth or poverty. They were expensive, too, costing $850 per resident.