In 1950, Detroit was the epitome of urban success. With a population of 1.85 million and almost 300,000 manufacturing jobs, America’s fourth-largest city was truly the paragon of economic prosperity. Jobs weren’t the only thing in high supply at this time; arts, music, and theatre also contributed to the city’s heightened success. However, today’s Detroit contrasts sharply with the shining city of 1950. In 2013 the city had to file for bankruptcy, jobs became few and far between, and it was ranked the most violent city in America. What caused this giant collapse? Unfortunately, the tragedy of Detroit is not unlike many other major American cities. As globalization and trade increased, urban America, whose economies relied heavily on manufacturing, was ravaged. The sharp decrease in jobs led to much more than an economic downturn. Social problems deepened and the overall quality of life sunk. Politicians across the years have tried to heal the wounds in the inner cities, but as it stands today, clearly there is much work to be done.
The definition of insanity is trying the same thing over and over again while expecting a different result. By this metric, we have a lot of insane politicians. Since 1964, beginning with President Lyndon Johnson’s Great Society, the only solution to economic distress has been more government intervention. Decade after decade politicians on the left have come forward with well-intentioned social programs that yield little or no result, sometimes even hindering the situation for poor families.
Our inner cities are calling for help. We should answer by giving them the greatest tool for growth we have in this nation: capitalism. Through an initiative called “Opportunity Zones” we can bring hope and prosperity to the folks who need it most in the inner city. Opportunity Zones would bring much needed investment into zip codes that have historically been left behind. It would work something like this: Distressed cities would be identified through metrics such as the unemployment rate, poverty rate, and median income. After a city is selected as an Opportunity Zone, two doors would open: capital formation and tax relief.
Capital formation is a fancy term to describe the process of financing the growth or creation of a business. Investors and private equity firms would have the opportunity to write off investments made in designated Opportunity Zones on their taxes. This would inundate communities with opportunity for small business. For example, think of a barber in Fresno, California. He runs a successful operation and his customers love him. He would open up another shop across town, but the initial costs of fees, licensing, and real estate are just too much. Through the Opportunity Zone initiative, he would be matched with an investor that could give him the money he needed to make it happen.
Opportunity Zones would also unlock the door of tax relief. Many poor cities sabotage economic growth before it even begins. Many times these cities have many services to fulfill but have low tax revenue coming from individuals. In turn, they try to make up for it by taxing businesses to make up the difference. Unfortunately, this hurts the cities even more by driving away potential and current places of employment for their residents. That would change through creating Opportunity Zones. The tax relief outlined in Opportunity Zones would cut startup fees and taxes in half for the first two years after a business begins. For entrepreneurs that don’t have an annual income of $100,000 or more, the Opportunity Zone tax relief would eliminate all taxes on the business for two years. This doesn’t just help the small business owner, but also the city government and the community at large. Imagine a young couple on the south side of Baltimore, Maryland. They want to magnify their culinary talents by opening up a new restaurant. Instead of getting overwhelmed by fees, heavy taxes, and other hindering expenses, they can focus all of their time and money on making their restaurant the best it can possibly be. In two years they will have a thriving business, employ members of their community, and contribute healthily to the city and the economy as a whole.
If you see politicians at a rally or on T.V. saying they have the end-all be-all solution to poverty, they are either lying to you or deeply naive. Opportunity Zones are not a silver bullet. But they absolutely are a start. For too long, our inner cities have been neglected, and in many cases communities of color have been left by the wayside. Once you get to know people who are stuck at the bottom of the economic ladder, you understand they don’t want welfare, they want jobs. They don’t want paternalism, they want opportunity. Let’s lift the burden of the economic oppression and open up the American Dream for all Americans, not just the wealthy.
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