Using Tax Policy to Promote Rural Development
The yawning economic gap between rural areas and the rest of the United States shows up in higher permanent nonemployment rates, higher minimum-wage employment, opioid abuse, incarceration, and premature death. This gap in lifetime earnings between rural and metro America is as significant as the difference between high school and college graduates. It contributed to the political division of the country revealed in the 2016 and 2020 presidential elections.
Addressing this problem would mean finding good jobs for Americans living in poor rural areas. Policymakers have suggested a wide variety of solutions to this issue, from broadband to green infrastructure to strengthening the social safety net. They haven’t, however, considered how tax policy might play a crucial role.
Specifically, we might grant corporations a zero tax rate to the extent that they hire people in the poor rural areas of the U.S. This would revise an existing, largely failed policy known as “enterprise zones,” or “opportunity zones,” which grants tax breaks to companies that locate in poor, largely urban neighborhoods. But this tax benefit has been too easy for corporations to game. Paradoxically, it promotes gentrification of booming large metro areas, and it seldom produces net new jobs for the target population.
We propose to target benefits to rural areas that have been losing population and to require that the employees that qualify the company for the tax incentive would have to be residents of the target zone. This limitation excludes many worthy communities, most notably low-income urban areas. However, there are better policy proposals directed at cities that can be structured differently and are less prone to causing gentrification.
Read more: https://prospect.org/economy/using-tax-policy-to-promote-rural-development/
(American Prospect)