So rather than attempting to seed clusters, governments could instead focus on spreading know-how in order to increase the attractiveness of laggard regions to productive firms. Improving the investment climate in struggling areas could help. In 2015 the Economic Innovation Group, an American think-tank, published a report by two economists—Jared Bernstein, a Democrat, and Kevin Hassett, a Republican, who now heads Mr Trump’s Council of Economic Advisers—which proposed a way of doing just this.
That mode of development–establishing homegrown businesses in less-trafficked regions–should be the focus, Glickman says. “It’s not a silver bullet, but it’s sort of low-hanging fruit in the policy debate that we should be setting up better systems of low-income debt financing and small business loans to get capital into these regions,” Glickman says. The Investing in Opportunity Act–a bipartisan piece of legislation led by senators Tim Scott (R-SC) and Cory Booker (D-NJ) and supported by EIG–creates a tax incentive for investors to fund initiatives in distressed areas.
There need to be economic incentives to boost business development in regions which are lagging behind. That is where the Investing in Opportunity Act could play a key role. The bill would allow for investors to defer capital gains tax if they reinvest into low-income communities that receive “opportunity zone” status. The bill also incentivizes long-term investment by actually lowering or even eliminating the amount of taxes paid on income from such investments.
Glickman and Lettieri said there is some hope for a bipartisan attempt to aid distressed communities. They point to, and support, the Investing in Opportunity Act co-sponsored in the U.S. Senate by Tim Scott, R-S.C., and Cory Booker, D-N.J., and in the House by Pat Tiberi, R-Ohio, and Ron Kind, D-Wisc. The legislative proposal would encourage investment in distressed communities by creating tax incentives — a reduction and potential elimination of capital gains taxes if investment profits are reinvested in "opportunity zones."
Congressman Pat Tiberi (R., Ohio), whose district includes Columbus, is among those trying to level that playing field through his Investing in Opportunity Act, a bipartisan piece of legislation introduced in 2016 that seeks to provide access to capital to areas that normally don’t see it — such as cities like Toledo.
That's why Lettieri touts a piece of proposed legislation favored by Sen. Cory Booker, D-N.J., and Sen. Tim Scott, R-S.C. Named the Investing in Opportunity Act, it would spur investors throughout the nation to put money in so-called opportunity zones, and pool capital together among investors to diminish the risk of investing in these zones.
The EIG is a strong advocate for the Investing in Opportunity Act, which proposes favorable tax treatment for investors putting money into distressed “opportunity zones,” and has supporters on both sides of Congress. Lettieri argues that an economic dynamism agenda can receive cross-party support where more controversial policies struggle. “There’s a lot of debate in Congress about the future of the economy, but there’s broad bipartisan and empirical support for restoring historic levels of dynamism and really restoring power to entrepreneurs and workers over incumbents and entrenched interests,” he says.