A New Brief! Promise Zones and Policy Implications

The Center for the Study of Social Policy is excited to release a new policy brief on the Obama Administration’s plans to launch “Promise Zones.”  Promise Zones, the latest addition to a continuum of place-based strategies, will foster partnerships between the federal government and communities, leverage local investments, and increase access to tools and resources to help in community revitalization efforts.

Over the next four years, the administration will designate 20 communities as Promise Zones, including up to five in 2013. The communities will be designated in urban, rural, and tribal communities with poverty rates over 20 percent. This place-based program will target local needs by helping communities focus on job creation, increasing economic activity, improving educational opportunities, reducing violent crime, and leveraging private investment.

Although Promise Zones will not receive direct funding, selected communities will have access to several resources, including tax incentives. If enacted by Congress, private businesses will receive tax incentives for hiring and investing in Promise Zones. The tax incentives are intended to spark job creation and attract private investment in high poverty neighborhoods, and because these tax incentives are targeted to the communities in greatest need, they have the potential to both create jobs and reduce poverty.

Similar tax incentives have been utilized previously through Empowerment Zones and the Renewable Communities Program as designated by the U.S. Department of Housing and Urban Development and the Department of Agriculture. Under the Empowerment Zones and Renewable Communities programs, qualifying businesses are eligible for billions of dollars in tax incentives through employment credits, low-cost loans, increased tax deductions, partial-exclusion of tax on capital gains upon the sale of certain assets, as well as other incentives.

However, there can be unintended consequences for tax incentive programs if not implemented as intended. Tax incentives for Empowerment Zones have previously received criticism for not specifically targeting distressed areas enough to attract investments, and many states have loosened their zone criteria to encompass any area within the state to qualify—therefore no longer serving their original anti-poverty intent. Moving forward, it is essential to maintain the anti-poverty goal of the tax incentives included in the Promise Zones proposal—that is the surest way to benefit communities with the highest need and to transform our nation’s highest-poverty areas.

To read CSSP’s policy brief on Promise Zones, click here.

To access CSSP’s Investing in Community Change blog, click here.