Gov. Phil Bryant has done Marion County a huge favor by approving three “Opportunity Zones,” which offer serious tax breaks to investors, in our county.
Bryant could only approve 25 percent of Mississippi’s census tracts that met low-income qualifications. That came out to about 100 statewide. Marion County got three, or about 3 percent of the total, despite having only about 0.8 percent of the state’s population. That’s a major win.
I don’t know exactly why Bryant chose to help us, but we’ll certainly take it. I suspect it had something to do with: No. 1. Having an organized application through the Marion County Economic Development Partnership, and No. 2: Bryant understanding that there are enough business-savvy people with money based in Marion County to take advantage of the zones’ tax benefits.
Although the zones were put into the Republican tax package Congress passed last year to help poor areas, you need rich
people to invest their money in them – the tax benefits from the Opportunity Zones come through lower capital gains taxes; your Average Joe struggling to make ends meet has no capital gains, much less any worries about paying taxes on them.
Capital gains, for those of us who have slept a few hundred nights since high school economics, are profits made from selling investments. For example, buy a stock for $100 and sell it 10 years later for $150. You owe a capital gains tax on the $50 you made. The wealthy — incomes generally of more than $400,000 — pay about a 20 percent long-term capital gain tax. So they would walk away with $140 in this scenario.
Here’s how the Opportunity Zone would help:
The investor could choose to put their $150 into an opportunity fund. That’s a fund that is used to do something within one of the impoverished Opportunity Zones: Build a housing complex or start or expand a business, for example.
Then they would not have to pay that $10 capital gains tax immediately. They could wait to pay it until 2026: That’s eight years of additional growth before having to give the government its cut. So that $10 is making money for you over that time.
And if you hold onto the Opportunity Zone investment for at least 10 years before selling, you don’t have to pay any capital gains tax on the money made through it.
It comes out to some real savings: An analysis by the Economic Innovation Group found that “all else being equal, come 2028 an investor will be $44 better off for every $100 of capital gains they rolled over into an Opportunity Fund in 2018 than if they had chosen a more traditional stock portfolio instead.” Using those numbers, the average rate of return after taxes is 5.8 percent versus 2.8 percent.
Don’t understand all that? Don’t worry: There are plenty of rich dudes who do, and all over the country they’ll be flocking to find good Opportunity Funds to invest in because it means they’ll make a lot more money in the long run because of the tax benefits.
And Columbia is perfectly primed to benefit because of its Opportunity Zones, which cover much of the city as well as large areas in the northwest and southeast parts of Marion County. The tax benefits discussed above can only be had if you invest your money in such zones. That means Columbia could stand to benefit from outside investment money from throughout the United States over the next decade.
C-P Editor/Publisher Charlie Smith may be reached at csmith@columbianprogress.com.
