Rep. Tlaib’s Bill Targets Trump’s Opportunity Zones Scam
Tuesday, December 10, 2019
JACQUELINE LUQMAN: This is Jacqueline Luqman with The Real News Network.
Representative Rashida Tlaib has introduced legislation to repeal Trump’s qualified Opportunity Zones amendment to the 1986 tax code, citing Opportunity Zones as a scam that really benefit billionaires instead of the economically disenfranchised communities they were allegedly supposed to help. Although Tlaib’s legislation is directed at undoing this particular president’s efforts to allow already rich investors to raid hard-hit communities through property acquisition, the truth is that the idea of private investment benefiting economically disadvantaged communities, especially poor Black communities that were the targets of decades of racist legislation and exclusion from economic opportunity, has always been a scam that has gone unchallenged for too long.
Here to talk to me about who really benefits from investment zones and why they have never worked for the people they claim to help is Professor Mehrsa Baradaran. Professor Baradaran is a professor of law at UC Irvine Law School and is the author of The Color of Money and How the Other Half Banks. Professor Baradaran, thank you so much for joining me today.
MEHRSA BARADARAN: Thank you so much for having me again. It’s a pleasure.
JACQUELINE LUQMAN: So, Representative Tlaib’s legislation targets the Trump administration’s Opportunity Zones that is a part of his sweeping tax bill that he’s touted as one of the hallmarks of his administration. Now, Representative Tlaib said that the American people have been scammed by this Opportunity Zones program. But to understand why she would say this and what the problem is, Professor, can you first explain what Opportunity Zones are or what they’re supposed to be and how they claim to benefit economically depressed neighborhoods?
MEHRSA BARADARAN: Sure. I mean, I think Opportunity Zones are what Malcolm X or James Baldwin would call “the ghetto.” They are segregated Black spaces that were segregated by force over a long time, and the idea of calling them Opportunity Zones was a very sort of neoliberal capitalist spin on a history of racism and racial segregation. And it was President Nixon who came up with the idea of, “Oh, we’ll just have capitalism.” So he called it Black capitalism. And then you have Ronald Reagan calling it enterprise zones and Bill Clinton calling it Opportunity Zones and to Trump. So it’s a very straight line from Nixon to Reagan to Clinton to Donald Trump.
So this is not new. Trump is specifically a housing developer who has a history of preying on communities of color using his housing development and being very exclusionary. So the idea of this tax plan is to give tax cuts to big private equity firms and corporations to buy up properties in these Black segregated spaces. So who benefits? It’s these big companies. And how do they benefit? They get tax cuts from their tax liability. So they should be paying into fund and we’re saying, “Hey, if you buy into this area, you don’t pay the taxes that you’re supposed to pay.”
So it’s sort of a double whammy, one is you’re sort of increasing gentrification. You’re speeding that up by buying a property that could otherwise go to the residents of those areas, the historic residents. And two, you’re actually diminishing your tax pay outs into a common fund that we can actually use to build up public facilities in these areas. So it is a scam. It’s a common scam. It’s one that we’ve been seeing a lot. It’s not Trump’s doing, but it is not a benefit to these communities.
JACQUELINE LUQMAN: And what better person to perpetuate such a scam than, as you said, a real estate developer himself with a history of doing just this type of thing, finding ways to invest money into properties and to profit as much as he can without offering much of a benefit to people who especially are economically a hard hit.
MEHRSA BARADARAN: Yeah. I think something that the advocates of the Opportunity Zones will say is that these companies do bring jobs. So I think that we do have to recognize it. Yes, when a company moves into a… When Harlem got a Whole Foods or when Baltimore gets these big companies, they do bring jobs, but I want to make sure that we’re not misunderstanding who benefits. I mean, jobs, it’s labor, it’s not capital. So Adam Clayton Powell and other historic leaders in these spaces would say, “Yes, if you’re going to be a white company in a Black space, you have to hire the residents of the area, but it’s much better if you can own the land.” Malcolm X is very clear on this. It’s about land. You have to have the equity.
And so when you have a company coming in, buying the land and the equity and the capital; yes, there are labor benefits. You do have more jobs, but jobs don’t actually lead to wealth, specifically those sorts of jobs. Some jobs do, very good paying jobs do, but that’s not the type of things we’re talking about when we’re talking about these big retail establishments coming in or big developments coming in. It’s usually we’re talking about capital staying where capital always stays, which is with the people who started out with it.
JACQUELINE LUQMAN: And I’m glad you brought up the fact that these type of Opportunity Zones or empowerment zones or whatever type of private investment zones they want to be called, one of the arguments is these programs bring jobs, but they’re not the kinds of jobs that give people a decent wage that will enable them to stay in the communities that they grew up in or that they’ve lived in for decades, because with this opportunity, with this investment opportunity comes a lot of new development.
New development means rising property taxes, rising property taxes means that if people are renting, their rent goes up. If people own their homes, then their property taxes go up, then their mortgage goes up. So a job is not the end-all be-all, because as you say, we’re not talking about the kind of jobs that will produce wealth. We’re talking about largely low-paying jobs that will not sustain people’s ability to stay in these newly revitalized neighborhoods, right?
MEHRSA BARADARAN: Absolutely. I mean, to gain wealth, you need to have equity. Your home is rising in value, so you have to own or there are high paying jobs and that’s a whole different set of jobs. But when you look at these job numbers and people say, “Oh, well, people are employed.” Well, look closer, where are they employed? Are these jobs that could potentially really increase your ability to buy and to bring up your living and you’re able to sort of pass it down to your children? No, no. Most of these jobs are low wage. If you look at the recent jobs report that came out, you see that there’s an increase in low wage jobs. Half of the country, specifically Black and brown communities are working in low wage jobs and these jobs are not wealth building and they’re jobs we have full employment.
Of course people are working very, very hard at these jobs but they’re not paying them enough to have a sort of that wealth building, especially generational wealth building. Like the jobs that, let’s say the boomers had when they came home from the wars back in the 50s, 60s. In the 70s, you worked for a company, let’s say GE or whatever, and you had your pension, you had a wage, you had very good job stability, you lived in the suburb, and that was only for whites.
And so, when looking at the wealth gap, it goes hand in hand; the good jobs with the equity building homes versus the spaces that were segregated. There wasn’t access to good jobs. There wasn’t even transportation that you could take to these companies and there was tenant not ownership because of the way that these mortgages were race-based. And so those things come into today where you still have those dynamics play in. And as you’re seeing cities gentrify, you are seeing sort of the wealthy or usually whites coming back in and buying up those properties and displacing those formerly redlined residents out into less wealthy neighborhoods. And so that’s the reverse thing that’s happening.
JACQUELINE LUQMAN: Wow. So, even with the investment bringing jobs, we know that the jobs are not good paying jobs. They’re also not creating a situation where people benefit from as you said improve transportation because the investment usually doesn’t carry over into improving a transportation system so that people can get around better and take advantage of any of whatever new programs this investment raises.
But there’s another issue with Representative Tlaib’s legislation that does tie to how the rich help the rich through these Opportunity Zone kind of programs. Because it seems that our legislation came on the heels of a ProPublica exposé that showed that tax breaks that were supposed to go to the Detroit communities that Opportunity Zones programs there were supposed to help actually went to a major investor and contributor to Trump’s inauguration fund. And that was Quicken Loans founder, Dan Gilbert.
There was another issue with questions about campaign contributions and who of those contributors benefited from the Opportunity Zones programs in West Virginia and in other areas. Has this also been a common theme throughout the history of this private investment, to address a systemic exclusion of opportunity program?
MEHRSA BARADARAN: Absolutely. I mean you brought up Detroit and tax cuts and transportation; I want to link all that up. One thing the tax cuts do is remove tax dollars that we could use for public transportation. Every major city, you have a public transportation sort of halting in the 70s; where you actually don’t have good public transportation, not even to where we should be as like a developed nation. You look at China or Singapore and look at the train systems that they have, and we’re basically at the very primitive level of public transportation. And part of that is because we refuse to fund it with our tax dollars and that’s related to these tax cuts. So come in, you’re extracting wealth, you’re getting the tax cuts so you’re not paying back in so we can actually raise the public transportation.
On the Detroit housing, I mean, lot of Detroit properties are owned by private equity firms. And so when you say Opportunity Zones, you look at the maps that these places make, a lot of the homes are owned by private equity, just who bought it in bulk in several sectors of the country where you had abandoned properties because these firms had left and the disinvested sort of community members couldn’t buy it back. There was these tax liabilities that they couldn’t pay. And so these private equity firms have a ton of capital come in and buy up that whole thing and now Trump is saying, “Look, you can take your capital, make money, and you don’t have to pay the taxes.”
So it’s related, it’s pernicious, and it’s happening all over the country in areas that are marked as Opportunity Zones are places where developers have been wanting to invest anyway. And these are very well-funded developers who… I don’t know about the ties within the Trump administration, but that’s irrelevant to me. We’re talking about developers, private equity firms. I mean, the idea of the Trump Opportunity Zones came from Silicon Valley. There was a Silicon Valley billionaire who was part of Trump’s coalition. And that was their idea for San Francisco.
JACQUELINE LUQMAN: Really?
MEHRSA BARADARAN: In San Francisco, yes, you have more open properties then there are homeless people. But you’ve got this mismatch as a huge homeless population, property values are skyrocketing, and you are actually driving people out. San Francisco is now paying people to leave. They’re giving them bus tickets. And so this Silicon Valley guy is saying, “Look, wouldn’t it be nice if we, the tech entrepreneurs, can buy in San Francisco and also not pay taxes.” So that’s what the idea stems from and it’s a win-win for them.
JACQUELINE LUQMAN: It’s a win-win for the investor class, but it is a losing proposition. There is no opportunity in the Opportunity Zones programs for the residents that are in the areas that are targeted by these programs. So Professor, how do residents who are targeted by these programs challenge these efforts? What do they do? How do they stop these efforts?
MEHRSA BARADARAN: Yeah, I mean, don’t accept tax cuts to wealthy people, demand tax funds to be used to increase sort of all of that public facilities, parks, transportation, schools, all of the things that make communities vibrant and robust. I mean, we need to demand tax dollars for these spaces. It’s not just for these wealthy areas to cordon off tax money. We have a democracy and what we have with the tax code is localities keeping all that money inside that goes to their school, their transportation needs, which they don’t have, because the wealthy have different needs than the poor.
And we have this history of not putting in investment into these communities, and the opposite actually, to suck out the wealth that is in these communities. I mean, you have in these segregated Black spaces, a lot of cultural capital and social capital that the community has built up and as it gentrifies it gets picked off and it’s always enriching the rich. That’s sort of a natural thing unless you disrupt that.
And you’re not going to fix the racial wealth gap with tax cuts, period. You’re not going to fix the racial wealth gap through a private business, it’s just not going to work. We’ve been trying that for forty years. I don’t think it’s been a whole-hearted effort, but it’s not going to work. It’s going to work through public efforts, that’s how it’s always worked. It’s got to be through increased tax dollars being used, increased investments, public facilities, all of that stuff that we know works, because it works during the new deal. It just didn’t work for Black communities.
JACQUELINE LUQMAN: I’m sure this is not the last we will hear or see of these kinds of efforts to–honestly, as Professor Baradaran said–extract wealth from already economically excluded and segregated communities. But knowledge is power. And I thank you so much, Professor Baradaran, for speaking with me today and explaining why Opportunity Zones and all of the programs like it that came before it don’t work and how residents who are targeted by these programs can challenge them. Thank you so much.
MEHRSA BARADARAN: Thank you so much for having me. Thank you.
JACQUELINE LUQMAN: And thank you for watching. This is Jacqueline Luqman with The Real News Network.