Lessons and Limits: Tax Incentives and Rebuilding the Gulf Coast after Katrina

In the wake of the devastation wrought by Hurricane Katrina, Congress enacted legislation creating Gulf Opportunity Zones (GO Zones) in localities in Alabama, Louisiana, and Mississippi that suffered the most extensive storm damage. Special tax incentives created in these areas are designed to encourage investment, job creation, and economic growth. While many studies have been done to evaluate the effectiveness of federal and state tax-based efforts to redevelop distressed areas, none of the learning has been reflected in policy debates about the Katrina recovery effort. The evidence suggests that tax incentives alone are not enough—they work better when combined with good planning, local capacity-building, and good governance across sectors. This paper will summarize the purpose of the Gulf Opportunity Zone tax program and explain how this latest endeavor reflects the 25-year evolution of federal efforts to use tax incentives as a core tool for revitalizing distressed areas.