Do Enterprise Zones Work?

April 28, 1989

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Enterprise-zone legislation, which would give tax breaks to businesses willing to locate in depressed areas, never made it to the floor of the House of Representatives despite its strong endorsement from President Reagan. But this year, with a new administration and a new housing secretary, its chances may be greater than ever before. Congress would do well to take a close look at the idea, however. Despite extensive experience with such zones in the states, it is not at all clear that enterprise zones are the answer for distressed inner cities.

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When enterprise zones were first proposed in the United States in the early 1980s, congressional supporters, mostly conservative Republicans, touted them as a means of helping the inner cities while at the same time reducing government involvement in urban development. Instead of pumping federal money into urban programs, enterprise zones would bring private jobs and development to distressed areas by cutting taxes and streamlining government regulations.

Under a bill introduced in 1980 by Reps. Jack F. Kemp, R-N.Y., and Robert Garcia, D-N.Y., businesses willing to locate m areas designated by the secretary of housing and urban development as enterprise zones would be eligible for cuts in business income taxes, cuts in capital-gains taxes, tax credits for eligible employers and employees, and relief from many federal regulations.

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