Are Opportunity Zones a Sufficient Incentive for Targeting Investment in Memphis?

By John Gnuschke, Ph.D., Director
Sparks Bureau of Business & Economic Research, The University of Memphis

Web Map and Application by Ryan Hanson

One of the biggest challenges faced by Memphis is to create an environment where private-sector employers can be competitive, generate profits, and sustain growth.  Private-sector employers are the engines that drive the Memphis economy forward.  Opportunity Zones focus on using reductions in capital gains taxes to stimulate growth in economically-distressed areas of the city. The Opportunity Zone program was created by the national Tax Cuts and Jobs Act and is available in communities across the nation. The attached map shows where Opportunity Zones are located in Memphis.

Memphis is not unique in the barriers it has to economic growth.  For good or bad, Memphis and every city must work with its resource base to provide fuel for economic growth.  Every city must decide how it can improve the local pool of human capital, how it can recreate usable blocks of land, and how it can stimulate capital investments by employers.  The economic development process is complex and not easy to resolve. 

Targeting economic development with Opportunity Zones can have positive and negative implications.  Opportunity Zone incentives may tip the scales and make one area within the city more attractive than another.  But, it is doubtful that Opportunity Zone incentives will be enough to create new investments or attract new employers to Memphis that would not otherwise have located here.  It seems more likely that the tax incentives will make a few marginal decisions profitable and that the relocations to Opportunity Zones will help lower the already-existing barriers to growth. 

In essence, the Opportunity Zone incentives will be part of a larger and more important package of incentives that impact development.Employers generate taxes via the expansion of employment and income opportunities.Reducing taxes for employers willing to create jobs is a win-win situation for the community.In poor areas of the city that desperately need jobs, employer taxes should be minimized, and reducing capital gains taxes is one step in the right direction.But, winning the competition for jobs and even targeting neighborhoods will need more than capital gains tax reductions.Using broader or more unique combinations of incentives, including higher educational incentives and zero sum tax waivers, can reduce the barriers to growth and make Memphis uniquely attractive to employers.

Explore Shelby County Opportunity Zones by address in the web map below.