Imagine if Oregon paid a business to move jobs from Linn County to neighboring Lane County. You would rightly think that’s a waste of state resources.

But here’s the thing: something very similar is going on right now, due to the tax subsidy program known as Opportunity Zones.

In 2017, Congress created a set of three capital gains tax breaks for investors who put their money into eligible funds that invest in places designated as Opportunity Zones. These locations are supposed to be economically distressed, though luxury projects and more affluent areas have gotten a piece of the action. Depending on how long the investors keep their money in those funds, they can significantly shrink or totally eliminate taxes on their capital gains — the profits from those investments.

Because Oregon automatically replicates many federal tax breaks, Opportunity Zones also became part of Oregon’s tax code, piling a state tax subsidy on top of the federal one. Oregon lawmakers could have put a stop to it, but they didn’t. They’ve had many chances to part ways with this tax break that has syphoned about $55 million from schools and other essential services since 2021, while accomplishing little except lining the pockets of already wealthy individuals.

The most recent opportunity for the legislature to disconnect from this wasteful provision occurred during this year’s short legislative session. Last year, the massive budget bill enacted by the Republican majority in Congress passed a slew of tax breaks benefiting the rich and corporations. The package included an expanded version of Opportunity Zones. While the Oregon legislature did well in severing ties with some of the new federal tax breaks benefiting the rich and corporations, Opportunity Zones were not one of them.

That’s bad news, as a new study reminds us of the failure that is Opportunity Zones. In one of the most in-depth looks at the tax program to date, researchers studied the effects of Opportunity Zones on local employment. They found that while the program increased jobs in places designated as Opportunity Zones, most of those gains were offset by job losses in nearby communities. The new jobs created in Opportunity Zones, moreover, were “likely held by new as opposed to existing residents.” 

In other words, Opportunity Zones have mainly served to move jobs from one neighboring community to another, with most of those jobs not going to the people who were supposed to benefit from the program. 

While communities are seeing little or no benefits from Opportunity Zones and Oregon’s budget is taking a hit, wealthy investors are cashing in. They will be reaping tax benefits for years to come, unless the Oregon legislature finally comes to its senses and pulls the plug on this boondoggle.