UCLA

The Tax Cuts and Jobs Act of 2017 permitted US state governments to designate selected low-income census tracts as "Opportunity Zones." This designation permitted investors in projects located in these "Opportunity Zones" (OZs) to avoid or defer capital gains taxes on their investments. This provision was intended to increase the amount of investment in OZs, raising the incomes of households in designated census tracts. The processes of OZ designation was not uniformly transparent, with some indications areas with significant outside investments already in planned were more likely to receive OZ designations. This situation poses a challenge for traditional causal inference techniques, such as difference-in-differences. In this paper, an alternative set of assumptions are used to evaluate the effect of OZ designation on growth in median household income. These results suggest that the Opportunity Zones program has had a positive effect on income growth in areas that received the Opportunity Zone designation, but highlight the significant uncertainty involved in such an estimate.