Tax credits

The most inefficient and stupid way to spend a disaster recovery allocation. Taking into account all the bonds, tax credits, and other benefits extended to businesses throughout the GO Zone regions of Alabama, Mississippi, and Louisiana, the package is expected to cost the country about $9 billion in federal revenue by 2015, according to the U.S. Government Accountability Office. But while the cost of the tax breaks can be quantified, assessing the return on our investment is more difficult.

GO Zone states tended to issue bonds on a “first-come, first-served basis,” reported the Government Accountability Office in 2008. The result? Real-estate investors who bought luxury condos near the University of Alabama football stadium won big in Tuscaloosa because they were able to take advantage of an incentive that allowed anyone buying property within a GO Zone, even a condo, to take accelerated depreciation (a front-loaded tax credit) on purchases. In Mississippi, beachfront vacation homes have come back bigger than before the storm thanks to the incentive for real-estate investors. Meanwhile, affordable housing for the people who work in the region’s tourism industry continues to lag, as nonprofit developers struggle to sell the act’s low-income-housing tax credits in a recessionary market. Analysts say the federal government should have directed resources toward fulfilling specific recovery goals, rather than letting states draw down the money according to market whims.