Infrastructure Plan Could Boost NJ Opportunity Zones | Opinion





By Charles Meyer

The US Senate this week moved closer to passing President Biden’s $ 1,000 billion infrastructure bill – the biggest investment in railways, roads, broadband and the power grid the United States for decades. New Jersey political leaders hope the landmark legislation will help fund critical state projects like the Gateway Tunnel.

One of the hallmarks of the Infrastructure Investment and Jobs Act is to channel investments to underserved communities, including those in New Jersey, positioning them as hubs for next-generation jobs and innovation. The White House aims to “revitalize manufacturing, secure American supply chains, invest in R&D and train Americans for the jobs of the future.” This goal has eluded presidential administrations for much of the 21st century. Yet a convergence of factors makes the next few days a particularly favorable window for progress – but perhaps not in the way policymakers expect.

One of the ways the Biden administration plans to foot the infrastructure bill is to almost double the tax rate wealthy Americans pay on profits from selling stocks. This rise in capital gains would have major financial impacts, and observers are debating what that would mean for economic equity and federal revenues. The increase could also have a surprisingly powerful effect on employment and business growth in low-income areas by directing investors to areas of opportunity.

An oft-overlooked feature of the 2017 tax bill, the Opportunity Zone program offers investors the ability to defer years of tax on their capital gains in return for supporting economic development in areas where it has historically taken hold. late. By dramatically strengthening investors’ incentives to reinvest their capital gains with favorable tax treatment, the planned tax hike could be a big boost for low-income communities and a boost for the offshoring of lower-income manufacturing sectors. most important of our country.

It sounds like a rare win-win for the bipartisan agenda, originally co-sponsored by Republican Senator Tim Scott and Democratic New Jersey Senator Cory Booker. So far, however, investors are not rushing to register. The reason? The Biden administration has expressed interest in redesigning the Zones of Opportunity, potentially tightening up the rules to ensure sufficient social impact. This uncertainty has undermined enthusiasm. During this time, one of the program provisions expires at the end of that calendar year. In short, 2021 is a decisive year.

New Jersey is home to 169 Qualifying Opportunity Areas, employing over 740,000 low-income Garden State residents, so there’s a lot at stake here. Newark alone has 15 zones.

A reinvigorated Opportunity Zone program goes well beyond tax rules: it can accelerate U.S. production of materials critical to our advanced technology supply chains. The global chip shortage, for example, has started causing severe shortages in everything from automobiles to home appliances. In a meeting with industry executives this spring, the White House stressed “the importance of encouraging additional semiconductor manufacturing capacity in the United States to ensure that we are never again faced with shortages “.

This is not a theoretical scenario. Opportunity zones in Georgia, Maine, Tennessee, California, Ohio and New Jersey are already laying the groundwork for the jobs of tomorrow. Take the Brooklyn Navy Yard, for example. Before becoming an area of ​​opportunity, the Navy Yard had a proud history as one of the iconic arsenals of democracy in the United States. The yard employed 70,000 workers during World War II, while welders and engineers helped build some of America’s warships. The region had a rough time for decades after the war, but the Opportunity Zones program rejuvenated the spirit of innovation and the need for jobs. Employment has exploded over the past three years as companies ranging from telecommunications and transportation to precision manufacturing build their businesses in redeveloped factories that were largely closed just a few years ago.

The high cost of the Biden administration’s jobs and infrastructure bill has been a sticking point. In reality, however, the amount of private wealth available to invest in founding companies is many times greater. The challenge now is to create the conditions in which this capital is deployed in a meaningful way. With Opportunity Zones, investors have the ability to lock in the current rate, stimulate private investment in capital infrastructure, and pay no tax on the gain of the investment.

Biden’s jobs and infrastructure bill will take time to transform the nation, but we have a concrete way to build better now. The Zone of Opportunity program enjoys substantial bipartite support. There is even legislation pending in the House to extend tax benefits in the zones until 2028 due to the pandemic. Now is not the time to phase out this innovative program. Investors and employers alike need enough certainty from Washington to bet on the jobs of tomorrow. The timeliness of the program is striking. Let’s open the door.

Charles Meyer is managing partner of Meyer Keith Ventures.

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