The Pro-Gentrification Origins of Place-Based Investment Tax Incentives and a Path Toward Community Oriented Reform

Place-based investment tax incentives, which encourage taxpayers to invest in poor areas, constitute a particularly controversial, yet undertheorized, category of tax laws. The central problem presented by current place-based investment tax incentives is a contradiction between rhetoric and reality. They are presented as laws that benefit low-income communities, yet the dominant types of place-based investment tax incentives are not designed for this purpose. Understanding the reasons for this disconnect is key to assessing the limits and potential of place-based investment tax incentives as anti-poverty tools. By tracing the development of place-based investment tax incentives to their pro-gentrification origins, this Article argues that what many anti-poverty advocates view as a flaw — the lack of safeguards for poor communities that allegedly opens the door to abuses — is, in fact, a feature of most current place-based investment tax incentives. This Article makes several important contributions to the legal literature. First, it helps to establish spatial inequality as an area of inquiry for tax law research. Second, it advances our understanding of how place-based investment tax incentives relate to nontax anti-poverty policies. Third, it provides guidance for policymakers. This Article contends that if place-based investment tax incentives are used at all, then they should be used for anti-poverty goals. Place-based investment tax incentives have a unique advantage over nontax policies in that they continue to enjoy bipartisan support even as the political climate grows increasingly polarized. Thus, rather than abandon the tax-based approach, this Article argues that state and local governments should introduce pilot programs of community oriented investment tax incentives. Accordingly, this Article recommends that lawmakers employ mental mapping techniques to design tax incentives that are more likely to benefit residents of poor communities. This would enable researchers to study their impact and evaluate their potential as large-scale anti-poverty programs