Liquor stores can’t claim a hot new U.S. tax break designed to create jobs in poor communities. One of the biggest property developers for marijuana ventures says it can.
Country clubs and golf courses are barred, too -- but not a wide variety of other luxury properties, such as a new hotel for visitors to Napa Valley wine country.
Massage parlors are out. But the maker of a robotic personal massager that promises “hands-free blended orgasms” just raised millions from wealthy investors planning to claim the tax break.
“It’s been great for us,” said Lora Haddock, the company’s founder.
Welcome to the quirky fine print inside President Donald Trump’s signature tax overhaul, which has created more than 8,700 opportunity zones across the country. The idea is to spur investments in areas left behind. But when crafting the law, the authors included rules from past economic-development initiatives that banned a variety of businesses deemed undesirable. Now, some are questioning whether the lines make sense.
Researchers have pointed out, for example, that the new tax break might be used by makers of cigarettes and guns, as well as mining companies, despite their increasingly controversial impact on poor communities.
“There’s an element of arbitrariness to it, for sure,” said Samantha Jacoby, a senior tax legal analyst at the Center on Budget and Policy Priorities. “If the goal is to improve economic outcomes for low-income people who tend to live in areas that have faced systemic poverty, racial discrimination and lack of opportunity, you’d be better off with public investments in infrastructure and education.”
The tax break for investing in opportunity zones is now a White House talking point as Trump gears up for the 2020 election. The generous incentives -- once overlooked in the big package Republicans pushed through in late 2017 -- are the talk of property developers and money managers for the ultra-wealthy. Community leaders are excited too, hoping it might reinvigorate blighted cities and rural areas.
The list of so-called sin businesses that Congress included in the law was drawn from a prior statute that also included gambling establishments, racetracks and hot tub and tanning facilities. But it was just meant as a starting point, said Steve Glickman, who helped come up with opportunity zones when he was chief executive officer of the Economic Innovation Group, a Washington think tank.
Lawmakers wanted to empower states and local authorities to steer money to areas and projects they deem important, he said. If leaders in those places want to go further, they can layer on additional restrictions.