It’s takes a village–a robust suite of policies and institutional supports–to reconnect a lot of people and places who’ve long been left behind to overall economic growth.
There are roles for government at all levels, with the federal gov’t poised at the top, both in terms of setting policy precedents and financing sub-national initiatives (remember, states can’t run deficits). There are roles for market-oriented, or pre-tax and transfer policies, like persistently tight labor markets and minding the impact of imbalances in credit markets and trade accounts. There are roles for tax and transfer programs, and not just counter-cyclical roles, but investment roles as well. And there are roles for philanthropic foundations, roles that are especially important in ensuring that existing programs both reach eligible recipients and have their intended effects.
In that spirit, the Rockefeller Foundation (RF) just announced a $65 million economic policy and place-based investment in low-income, working families through two major channels: refundable tax credits and Opportunity Zones.
Re the former, RF “will reach at least 4.6 million people at the state level by promoting awareness about the impact of expanding and modernizing the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).” These are, of course, policies we at CBPP have long championed, showing, for example, that they lifted almost 11 million people out of poverty in 2018. Earlier efforts by RF helped make sure eligible households in California and Maine had their earnings boosted through receiving credits for which they were eligible, and the new initiative announced today extends those efforts to eight more states.
The EITC/CTC are, to state the obvious, solidly already up-and-running. That’s not the case with Opportunity Zones, a tax incentive from the 2017 tax cut designed to incentivize patient capital investment in neighborhoods that have long suffered disinvestment. If you’ve paid any attention to this program, you know it’s been highly controversial. My own view is that the program has the potential to lastingly help some places that really need it…or, to become a wasteful tax shelter. The outcome depends on the oversight.
Thus far, the Treasury Dept has failed to promulgate the types of guidelines needed to ensure OZs are getting the most bang for their buck, but it’s still early days. Breathless reports about how the program is already a wasteful failure are totally overblown and premature (though see my colleague Samantha Jacoby’s critiques re too-low tax guardrails).
A key attribute about OZs are the extent of local control they allow and it’s here where the RF’s initiative is targeted. They’re supporting community direct involvement and engagement in 13 cities from the beginning of projects, to make sure jobs and other social and financial benefits go to the people who need them; to pushback on displacement/gentrification, and to derive/track impact metrics.
This is a welcome role for foundations to play in this space. I’m pretty sure OZs are here to stay. The question is whether they’ll realize their potential to offset decades of disinvestment in left-behind places, and one of the best ways to make that happen is to implement as much local control as possible by those who will fight to make sure these investments help the people they’re intended to help.