President Trump is creating a new channel to funnel additional resources into underserved communities through the 2017 Tax Cuts and Jobs Act’s Opportunity Zones provision, which ushers in a range of tax cuts to catalyze job growth in poor communities.
After decades of failed policies aimed at tackling poverty by providing cash grants or subsidized assistance, supporters of Trump’s new plan believe these targeted tax cuts will give the economy a boost. Experts say that while programs in the past have been of great aid to support children, seniors and disabled individuals, the problem with previous approaches is that they have proved, historically, to be more of a crutch to able-bodied people and discourages them from working.
According to research done by University of Chicago professor Casey Mulligan, Medicaid, which is the largest program created to combat poverty, dissuades people from earning above a certain amount because some 11 million workers would end up disadvantaged if they worked more since the amount in benefits they lost amounted to more than their increased pay. What this leads to is a population of working-age adults incentivized to work less.
Aiming to promote work and encourage able-bodied people to become more self-sufficient, the Trump administration has proposed new measures.
Another problem with the current programs is that they require employers and employees to pay higher taxes. The proposed Opportunity Zones reduce taxes on job creation, which is one of the most effective tools to reduce poverty by offering incentives to encourage private-sector investment in eligible underserved communities.
A reported 20 percent of people in America live in poverty, with a little over 10 percent of the population currently living in the 8,700-plus Opportunity Zones across the U.S.
Evidence shows that Opportunity Zones are already creating an impact, with investments projected to reach a total of $100 billion in the years ahead – which surpasses that amount spent on traditional programs against poverty like cash grants, food stamps and child health care.