Dilemmas of Disaster Zones: Tax Incentives and Business Reinvestment in the Gulf Coast after Hurricanes Katrina and Rita
Over the last decade, the U.S. federal government has increasingly turned to spatially targeted tax incentives to promote postdisaster revitalization. The logic behind this policy orientation is that targeting public subsidies to particular disaster zones will speed community recovery and encourage business reinvestment. To evaluate this claim, this paper uses the case of the Gulf Opportunity (GO) Zone of 2005 that provided tax incentives to businesses in the Gulf Coast area affected by Hurricanes Katrina and Rita from 2006 through December 2011. Drawing on qualitative and quantitative data, I find that damage was not a consistently significant determinant of GO Zone bond allocation at the parish level. Rather, GO Zone bonds were mainly allocated in low–damage areas and underutilized in New Orleans and heavily damaged areas. Though policy makers designed the program to stimulate small business recovery, GO Zone benefits went to large businesses located in areas least damaged by the hurricanes. Overall, the allocation of bonds using a first–come, first–served strategy combined with the huge size of the GO Zone reduced the effectiveness of the incentives offered and reinforced the disincentives for locating business and investment in disaster–devastated areas.