When I traveled to China in the early 2000s for business, I frequently explored Special Economic Zones (SEZs) that received preferential tax and incentives for businesses. With most of the economic growth centering around Beijing and Shanghai, the central government wanted to spread the wealth. As a result of tax incentives, business streamlining, foreign investment, and technology, SEZ cities such as Shenzhen and Zhuhai are now a couple of the richest and fastest growing cities in the country.
I’ve always wondered why the United States didn’t do the same. Sure, on a state level, governors can provide economic and tax incentives for businesses to set up shop in their respective states. But there was no such program on the federal level, where taxation and regulation are often the highest.
Until December 2017 that is when a new tax law was passed called the Investing In Opportunity Act. The law is designed to lure capital that faces heavy capital gains tax into Opportunity Funds, or O-Funds, which invest in roughly 8,700 Opportunity Zones, or O-Zones. These O-Zones are generally considered struggling cities or towns that are in need of redevelopment.