Jacob Wiegand, Deseret News
Gov. Gary Herbert speaks at a press conference and answers questions from the media at the Capitol in Salt Lake City on Tuesday, March 6, 2018.

Gov. Gary Herbert is facing a pending deadline to nominate up to 46 rural or urban areas in Utah as “Opportunity Zones.” He should ensure that, after thoughtful consideration of all proposals, he nominates a full 46 for eligibility for the federal program.

This policy is designed to channel capital toward increasing economic growth in poverty-stricken, underdeveloped areas. The proposal is simple: The government will give taxpayers who invest in designated areas favorable capital gains treatment, incentivizing development and investment in areas that desperately need it. The capital gains are both short and long term — offering immediate tax breaks on untaxed capital gains and the opportunity to sell investments free from capital gains tax after a decade.

The policy originates from the Tax Cuts and Jobs Act, Congress’ $1.5 trillion tax cut passed last year. The Opportunity Zones policy, however, went unnoticed, as partisan squabbling surrounded the tax cut and diverted attention from the more arcane elements of the bill. We don't appreciate the hurried method by which such ideas pass Congress; nevertheless, Opportunity Zones have the potential to be a commonsense solution to stimulate economic growth and spur development.

As John P. Bailey writes for The American Enterprise Institute, "this should allow distressed communities to tap a multi-trillion-dollar pool of capital to support a wide range of economic development activities." Utah, however, should work to ensure communities aren’t pushed out of their areas by rapid gentrification and instead are able to reap the benefits of these tax incentives.

Based on the last census, 181 Utah areas are eligible for the program; however, the governor can only nominate 46 to receive the tax incentives. Herbert has commendably taken a grass-roots approach to this nomination process, ensuring each county undertakes local consultations and holds hearings for input on which areas to petition the governor to nominate.

The northwest quadrant of Salt Lake City is one area likely to receive approval, as developers have already eyed it as the site of a new inland port. But Salt Lake City’s wealth disparities in a relatively small geographic area should cause state and local officials to pause as they consider best-practice approaches to development. Poorer areas of the city would benefit most from participatory development in which local needs are considered.

As noted by The Brookings Institution, Opportunity Zones will, at their best, be a new iteration on an idea that has existed in the United States since the Reagan administration. Research published in the American Economic Review shows evidence that Reagan’s “Empowerment Zones” encouraged substantive poverty alleviation and economic growth through an emphasis on “hiring, subsidized upfront investment in capital and equipment, offered loan guarantees, regulatory waivers, a partial exclusion of capital gains and large grants to local government authorities for local services and infrastructure.”

State and local authorities must work to promote local hiring and affordable housing as Opportunity Zones receive new investment. If not, gentrification threatens to push the problem out to surrounding areas — making these zones an opportunity only for investors and not for the populations they are intended to serve.

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This policy is designed to channel capital toward increasing economic growth in poverty-stricken, underdeveloped areas. The proposal is simple: The government will give taxpayers who invest in designated areas favorable capital gains treatment, incentivizing development and investment in areas that desperately need it. The capital gains are both short and long term — offering immediate tax breaks on untaxed capital gains and the opportunity to sell investments free from capital gains tax after a decade.