Following World War II, western Europe’s municipal and rural economies were devastated. In response, the United States in 1948 launched the Marshall Plan to provide $13 billion of capital and assistance for the rebuilding effort.
Seventy years later, in 2018, the U.S. government moved to spearhead the revitalization of its own urban and rural areas by creating opportunity zone (OZ) tax incentives codified in the controversial 2017 Tax Cuts and Jobs Act.
Adjusting for inflation, the Marshall Plan’s $13 billion investment would represent about $136.5 billion in current dollars. In contrast, the OZ incentives will be energized by the potential of an estimated $6 trillion in unrealized capital gains, cash parked in various assets and sitting on the tarmac of the American economy—and, legislators hope, ready to soar into reinvestment opportunities.
To be clear, these new zones are unlikely to attract anything near that $6 trillion figure. But they do not need to in order for the incentive to be hugely successful. If America’s emerging urban markets can attract just 2 percent of that potential pool, OZs would rival—and perhaps surpass—the Marshall Plan in terms of economic impact. But unlike the Marshall Plan, which was deployed for only four years, these zones will be operational for at least the next 10 years. Time is of the essence to fully capitalize on those benefits of tax deferral and tax reduction.