David Wessel, director of the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy and a longtime Wall Street Journal writer and editor, is out with a new book, Only the Rich Can Play. The volume is yet another example of the literature purporting to give the titillating “inside story” of how tax legislation becomes law. It’s in the tradition of Jeffrey Birnbaum and Alan Murray’s Showdown at Gucci Gulch, a public policy classic chronicling President Ronald Reagan’s 1986 tax reform, published early in Wessel’s Wall Street Journal career.

Only the Rich Can Play reports on the efforts of billionaire Shawn Parker, of Napster and Facebook fame, to get a tax proposal enacted. Parker pushes the idea of granting capital gains tax relief to investors who invest in an “Opportunity Zone” (OZ) in a low-income community. The initiative is in the tradition of the Enterprise Zones championed in the early 1980s by the late congressman Jack Kemp (R–NY).

An OZ initiative was a late insertion into the 2017 Tax Cut and Jobs Act (TCJA). It originated in the Senate-passed version of the bill and remained in the conference agreement signed into law. The initiative provides three tax incentives for realized capital gains that are then invested in designated communities: First, taxes on gains that are timely invested in an OZ are deferred until the earlier of the sale of the OZ investment or December 31, 2026. Second, taxes on such deferred gains are reduced by 10% for an OZ investment held for five years prior to the end of 2026, increasing to 15% for an investment held for seven years. (OZ investments made after December 31, 2021, will lose this kicker provided to early adopters.) Finally, any appreciation on an OZ investment is not taxed if the investment is held for 10 years. The ability to invest new money in OZs ends at the end of 2026, but the ability to hold an investment and earn tax-free returns runs through 2047.

Wessel’s book is divided into three parts. The first, comprising more than a third of the volume, details Parker’s creation of a bipartisan think tank, the Economic Innovation Group (EIG), and the work of Parker and EIG staff (referred to in the book as the “EIG boys”) to develop congressional interest in a new place-based economic incentive. This part of the book is full of the tales of boozy dinners and logs of political donations that one would expect in an “inside story,” as well as an anecdote of Sen. Tim Scott (R–SC) asking President Donald Trump to “help me get Opportunity Zones in the tax bill.” It also tells of the unveiling of the Joint Committee on Taxation’s very modest $1.6 billion estimate for the cost of the provision. Wessel bitterly criticizes the gaming of the score. (I assume he’ll offer a similar critique of the gaming of the Congressional Budget Office score for the spending provisions of President Joe Biden’s Build Back Better initiative.)

The next part of the book details the Trump administration’s implementation efforts. Wessel takes issue with the Treasury Department’s faithful implementation of the statute, which authorized the chief executives of the 50 states, the District of Columbia, and the territories to select any tracts that meet the statutory requirements for designation as OZs. He seems to want Treasury to second-guess the worthiness of roughly 8,000 nominated OZs, even though attempting to do so would be controversial given the statutory text and would undoubtedly cause Treasury’s determination process to take far longer than the 90 days allowed in the statute.

The remainder of the book provides anecdotal reporting on the effects of OZ incentives and the author’s judgement of the program. Wessel’s reporting finds more bad examples than good ones. He devotes a chapter each to Portland, OR, and Baltimore. In Portland, “nearly all of the central business district was designated as Opportunity Zone territory,” and money has flowed to the seven designated OZs for development projects that may have been accelerated by the tax benefit but likely would have happened anyway. In Baltimore, Wessel determined that the 42 designated OZs were “mostly well-chosen,” but they are hard-pressed to obtain OZ capital even though the “city looked for places that were most likely to draw money.” Location matters.

D.C. culture / Wessel believes that Parker and the EIG boys should have consulted more with Beltway experts to put together a policy that would have had fewer unintended consequences. His final analysis is that the incentive in its current form “is doing more to help wealthy investors and real estate businesses reduce their tax bills than help residents of the neighborhoods it was supposed to revive.”

One ultimately gets the impression that he dislikes OZs because they are not the product of the D.C. culture. His book does not explore any role that previous government interventions may have had in the persistent poverty found in these low-income communities. It does suggest that good lobbying and poor legislative text do not lead to the best outcome on the ground.

Wessel wants a powerful federal bureaucracy to save Congress from itself when poorly drafted legislative language becomes law. I disagree with that remedy but agree that the OZ initiative is a cautionary tale about legislative text that has not been widely vetted. In this case, the consequences of error are relatively small: $1.6 billion over 10 years. In contrast, the wasteful consequences of the poorly drafted American Recovery Act and Build Back Better (should it become law) are in the hundreds of billions of dollars.

Wessel repeats the phrase, “Don’t blame the players, blame the game,” when describing how specific cases are contrary to the intent for OZs but squarely within the letter of the law. A successful game comes with a clear set of rules that have been thought through. Congress’s job is to provide those rules. The book would be more helpful and influential to the policymaking process if it had noted that, in a free society, billionaires who wish to dabble in policy are free to do so (like everyone else), but their efforts must be fully vetted by Congress. OZ failed in this regard.