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What irks me about this article is its sole narrative on billionaires helping billionaires. Nowhere in the regs does it say that somebody with a $100 gain could

What irks me about this article is its sole narrative on billionaires helping billionaires. Nowhere in the regs does it say that somebody with a $100 gain couldn't invest that into a project. Granted there are other regulatory issues that will limit a lot of this activity to accredited investors (via Reg D private placements), but OZ regs have nothing to do with a persons net worth or income. As other posters have commented, the benefits are three fold - deferring your gain until the end of 2026, a 10% step up in basis on the gain if you hold for 5 years, an additional 5% step up if you hold for a full 7 years, and an exemption on tax for the appreciation of the assets you've invested in if you hold them for 10 years. Here's a link to an ebook we just put out if anybody has interest in reading how it will work in the real estate space - https://www.realcrowd.com/blog/2018/10/the-real-estate-investors-guide-to-opportunity-zones https://www.realcrowd.com/blog/2018/10/the-real-estate-inves...

tanderson92 8y ago
"Poor people are just as free to avoid taxes on their long-term investments in illiquid capital-intensive projects as millionaires and billionaires" is not a take I expected to see, but thank you HN for proving me wrong.
- dwiel 8y ago
  Not only that, but this poor person has to use capital gains for this ...
  - tanderson92 8y ago
    Filling out and finding ways to minimize taxes due to 1040 Schedule Ds, that regular feature of tax season that people making $50k/yr or less know and love.
- manigandham 8y ago
  Does nobody gain at all from the investments in an opportunity zone? Are those benefits just ignored?
  - tanderson92 8y ago
    You won't find me arguing against the need for more investment in opportunity zones, or the social benefits of doing so. We don't need a redistributional giveaway to rich people to do so, of course.
    - manigandham 8y ago
      Who else is going to do the investing then? The point of any investment is a return, and who would expect or choose a return from these areas compared to many other opportunities?
      - tanderson92 8y ago
        The government investing the money would be nice. Apparently they have a lot of money to invest, they just redistributed $2T to primarily rich people through the TCJA. (I'm a socialist in part because of the market's inability to effect change, such as investment in OZs, which doesn't have a sufficient monetary reward but has significant societal reward. Some people call this a "market failure")
        manigandham 8y ago
        Yes, that's the only other option isn't it? But why is that better? Why have a massive inefficient government spend a vast sum of money when instead it can just defer some tax collection, letting these investors take the risk and optimize for success?
        tanderson92 8y ago
        I disagree that governments necessarily must be inefficient, but yes this is an area with some nuance. I could see myself being in favor of an incentivized tax structure for OZs, along with a highly redistributional tax system for income, wealth and equity, but I don’t think too many of the people who argue for the power of markets to incentivize investment of OZs are also in favor of the redistibutional part ;)
- charlesdm 8y ago
  People cry tax avoidance, but I'm assuming these will MOSTLY be areas where no one and their mother would want to reasonably invest. Areas with little hope for the people there to establish themselves in a good life. If this moves some money into these underdeveloped areas, after a 10 year stock market bull run, then great. Most of the investments will go to zero, but the ones that don't might have a good impact for the people living there.
  - heavenlyblue 8y ago
    >> assuming Are there actual numbers somewhere?
    - thrmsforbfast 8y ago
      There's a map in the article. some of the zones are legitimate opportunities. A lot of them -- and the ones most likely to attract investment -- make it patently clear that this is a low-risk give-away.
  - wefarrell 8y ago
    I live 2 blocks from one of these areas and used to live in one. I was immediately able to find a 400 sq foot studio for $3,250 per month inside one: https://streeteasy.com/building/235-adams-street-brooklyn/14a https://streeteasy.com/building/235-adams-street-brooklyn/14...
    - njarboe 8y ago
      Not saying that things aren't really expensive but this place has a "days on market" of 1529 and is 20% bigger at 473 sq ft.
  - thrmsforbfast 8y ago
    If you look at the map, you'll notice areas with white hot housing and rental markets (2k+ rents, 600k+ floors of houses). See my other comment for a concrete example. Even worse, the zones are chosen by governors and the rules for selecting them are extremely lax. I know enough about the local politics of where I grew up to know that at least one of the OZs makes literally no sense and is 100% a kickback to a major gubernatorial donor.
- WalterBright 8y ago
  The long term capital gains tax rate for married people with less than $19,000 in income is zero.
  - lexs 8y ago
    How much long term investment can you realistically do when your income is less than $19,000?
    - WalterBright 8y ago
      The point is that low income people do not need a capital gains tax optimization strategy, because the tax is already 0.
  - ryanwaggoner 8y ago
    I believe it’s 0% up to $77k for married filing jointly.
- refurb 8y ago
  What if some blue collar worker has his 401k or pension plan invested in a company that is taking advantage of the tax break?
  - tanderson92 8y ago
    The article is about a tax break for people, not companies, so this should not affect any investment decision that companies make. And, of course, the 401k/pension plan, or company that the 401k/plan owns, could easily invest in the OZ if they so desired, if it made financial sense separately from the individual tax break.
    - refurb 8y ago
      It's not just limited to individuals, company can invest and get the tax break as well.[1] [1]https://www.barrons.com/articles/opportunity-zone-funds-to-deliver-a-tax-break-1538680532 https://www.barrons.com/articles/opportunity-zone-funds-to-d...
  - gcb0 8y ago
    his gains will still be much less than if the company paid more taxes. also it is irrelevant, as every single listed company will benefit from it, making no stock differentiation in price.
- mendelk 8y ago
  "In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread." - Anatole France (Note, this is not to express an opinion on the GP!)
  - tanderson92 8y ago
    This was, indeed, the inspiration for my comment. It’s cogent and persuasive encapsulation of current free market thought.
KerrickStaley 8y ago
When you have more money or capital assets, more of your income comes from capital gains and less comes from the labor you do. So decreasing taxes on capital gains disproportionately benefits people who are already wealthy.
- miscreanity 8y ago
  Any tax decrease "disproportionately" benefits the wealthy because they have more. A 1% decrease on $50,000 income is going to be less than the same percentage decrease on $500,000. Of course, you could argue that "progressive" tax take care of that, but it only serves to drive away a portion of high meet with individuals to the point where tax revenue generally doesn't change much anyway while it can actually increase the overall burden on lower income earners. Better solution: goodbye income tax. Much like open source software where individual usage is free, only consumption/sales and corporate taxation has any legitimacy now. Businesses need a commerce-positive, safe environment for such activity. In order to attract that, no income tax is an excellent incentive. Businesses, which are fictitious entities, support the services needed to entice localized growth; as population grows, so does business activity and revenue, thus tax revenue for services as well. Of course, any system is prone to corruption filling the power vacuum so eventually it would fail. However, so long as individuals are as unencumbered as possible, people can opt out rather than continue to be abused. Additionally, taxes serve as a psychological leash and intellectual substitute. Financial/investment education is virtually non-existent in the US and it's generally misguided or even wrong in some instances. If individuals are coddled and promised to be taken care of, they become unprepared for difficult situations. Let a dog be a dog and let a person be a person, not a slave.
  - dragonwriter 8y ago
    > Any tax decrease "disproportionately" benefits the wealthy because they have more. Untrue; consider, e.g., the adoption of EITC if it didn't already exist. It's a pre tax decrease, but wouldn't benefit the wealthy (in first order effects) at all. Or abolishing payroll tax and transferring equivalent amounts into the various trust funds out of general revenue, a pre tax decrease that would slightly benefit the wealthy (because Medicare tax), but disproportionately benefit those whose income was primarily from labor, which isn't the wealthy.

tanderson92 8y ago

"Poor people are just as free to avoid taxes on their long-term investments in illiquid capital-intensive projects as millionaires and billionaires" is not a take I expected to see, but thank you HN for proving me wrong.

dwiel 8y ago
Not only that, but this poor person has to use capital gains for this ...
- tanderson92 8y ago
  Filling out and finding ways to minimize taxes due to 1040 Schedule Ds, that regular feature of tax season that people making $50k/yr or less know and love.
manigandham 8y ago
Does nobody gain at all from the investments in an opportunity zone? Are those benefits just ignored?
- tanderson92 8y ago
  You won't find me arguing against the need for more investment in opportunity zones, or the social benefits of doing so. We don't need a redistributional giveaway to rich people to do so, of course.
  - manigandham 8y ago
    Who else is going to do the investing then? The point of any investment is a return, and who would expect or choose a return from these areas compared to many other opportunities?
    - tanderson92 8y ago
      The government investing the money would be nice. Apparently they have a lot of money to invest, they just redistributed $2T to primarily rich people through the TCJA. (I'm a socialist in part because of the market's inability to effect change, such as investment in OZs, which doesn't have a sufficient monetary reward but has significant societal reward. Some people call this a "market failure")
      - manigandham 8y ago
        Yes, that's the only other option isn't it? But why is that better? Why have a massive inefficient government spend a vast sum of money when instead it can just defer some tax collection, letting these investors take the risk and optimize for success?
        tanderson92 8y ago
        I disagree that governments necessarily must be inefficient, but yes this is an area with some nuance. I could see myself being in favor of an incentivized tax structure for OZs, along with a highly redistributional tax system for income, wealth and equity, but I don’t think too many of the people who argue for the power of markets to incentivize investment of OZs are also in favor of the redistibutional part ;)
charlesdm 8y ago
People cry tax avoidance, but I'm assuming these will MOSTLY be areas where no one and their mother would want to reasonably invest. Areas with little hope for the people there to establish themselves in a good life. If this moves some money into these underdeveloped areas, after a 10 year stock market bull run, then great. Most of the investments will go to zero, but the ones that don't might have a good impact for the people living there.
- heavenlyblue 8y ago
  >> assuming Are there actual numbers somewhere?
  - thrmsforbfast 8y ago
    There's a map in the article. some of the zones are legitimate opportunities. A lot of them -- and the ones most likely to attract investment -- make it patently clear that this is a low-risk give-away.
- wefarrell 8y ago
  I live 2 blocks from one of these areas and used to live in one. I was immediately able to find a 400 sq foot studio for $3,250 per month inside one: https://streeteasy.com/building/235-adams-street-brooklyn/14a https://streeteasy.com/building/235-adams-street-brooklyn/14...
  - njarboe 8y ago
    Not saying that things aren't really expensive but this place has a "days on market" of 1529 and is 20% bigger at 473 sq ft.
- thrmsforbfast 8y ago
  If you look at the map, you'll notice areas with white hot housing and rental markets (2k+ rents, 600k+ floors of houses). See my other comment for a concrete example. Even worse, the zones are chosen by governors and the rules for selecting them are extremely lax. I know enough about the local politics of where I grew up to know that at least one of the OZs makes literally no sense and is 100% a kickback to a major gubernatorial donor.
WalterBright 8y ago
The long term capital gains tax rate for married people with less than $19,000 in income is zero.
- lexs 8y ago
  How much long term investment can you realistically do when your income is less than $19,000?
  - WalterBright 8y ago
    The point is that low income people do not need a capital gains tax optimization strategy, because the tax is already 0.
- ryanwaggoner 8y ago
  I believe it’s 0% up to $77k for married filing jointly.
refurb 8y ago
What if some blue collar worker has his 401k or pension plan invested in a company that is taking advantage of the tax break?
- tanderson92 8y ago
  The article is about a tax break for people, not companies, so this should not affect any investment decision that companies make. And, of course, the 401k/pension plan, or company that the 401k/plan owns, could easily invest in the OZ if they so desired, if it made financial sense separately from the individual tax break.
  - refurb 8y ago
    It's not just limited to individuals, company can invest and get the tax break as well.[1] [1]https://www.barrons.com/articles/opportunity-zone-funds-to-deliver-a-tax-break-1538680532 https://www.barrons.com/articles/opportunity-zone-funds-to-d...
- gcb0 8y ago
  his gains will still be much less than if the company paid more taxes. also it is irrelevant, as every single listed company will benefit from it, making no stock differentiation in price.
mendelk 8y ago
"In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread." - Anatole France (Note, this is not to express an opinion on the GP!)
- tanderson92 8y ago
  This was, indeed, the inspiration for my comment. It’s cogent and persuasive encapsulation of current free market thought.

KerrickStaley 8y ago

When you have more money or capital assets, more of your income comes from capital gains and less comes from the labor you do. So decreasing taxes on capital gains disproportionately benefits people who are already wealthy.

miscreanity 8y ago
Any tax decrease "disproportionately" benefits the wealthy because they have more. A 1% decrease on $50,000 income is going to be less than the same percentage decrease on $500,000. Of course, you could argue that "progressive" tax take care of that, but it only serves to drive away a portion of high meet with individuals to the point where tax revenue generally doesn't change much anyway while it can actually increase the overall burden on lower income earners. Better solution: goodbye income tax. Much like open source software where individual usage is free, only consumption/sales and corporate taxation has any legitimacy now. Businesses need a commerce-positive, safe environment for such activity. In order to attract that, no income tax is an excellent incentive. Businesses, which are fictitious entities, support the services needed to entice localized growth; as population grows, so does business activity and revenue, thus tax revenue for services as well. Of course, any system is prone to corruption filling the power vacuum so eventually it would fail. However, so long as individuals are as unencumbered as possible, people can opt out rather than continue to be abused. Additionally, taxes serve as a psychological leash and intellectual substitute. Financial/investment education is virtually non-existent in the US and it's generally misguided or even wrong in some instances. If individuals are coddled and promised to be taken care of, they become unprepared for difficult situations. Let a dog be a dog and let a person be a person, not a slave.
- dragonwriter 8y ago
  > Any tax decrease "disproportionately" benefits the wealthy because they have more. Untrue; consider, e.g., the adoption of EITC if it didn't already exist. It's a pre tax decrease, but wouldn't benefit the wealthy (in first order effects) at all. Or abolishing payroll tax and transferring equivalent amounts into the various trust funds out of general revenue, a pre tax decrease that would slightly benefit the wealthy (because Medicare tax), but disproportionately benefit those whose income was primarily from labor, which isn't the wealthy.