Fighting Crime with Taxes: How Opportunity Zones Impacted Crime in Chicago

While there are many approaches to combat crime in Chicago, most strategies focus on policing, whether that is through an increased police presence or community-centered policing tactics. But there are other viable, unconventional approaches to reduce crime, such as educational reforms, mental health services, and economic development programs. In this paper, I will focus on one of these other, more untraditional approaches – economic development – by exploring how the Opportunity Zone program, an economic, placed-based policy implemented through the federal tax code, impacted crime specifically in Chicago. The Opportunity Zone policy provides tax benefits to investors that fund projects in Qualified Opportunity Zones, which are census tracts identified as areas in economic distress by the IRS and local government. The intention of this tax program is to incentivize private economic stimulus in disinvested communities. It was not designed as a targeted solution to reduce crime. Nonetheless, because the derivations of criminal activity are often rooted in the lack of economic opportunity, I seek to examine in this paper how this economic development program unintentionally impacts crime rates in Chicago. Through a difference-in-differences research design, I conduct a linear regression analysis that drew from American Community Survey, IRS, and City of Chicago data. My analysis finds that the implementation of the Opportunity Zone policy in Chicago led to a decrease in total and violent crime rates in Qualified Opportunity Zones, indicating that the implementation of the policy unintentional reduced crime rates in these Zones. These results suggest economic development programs implemented through the tax code, like Opportunity Zones, could be a viable solution to fight crime. Thus, I recommend that state and federal governments further explore this potential and evaluate the costs and benefits of programs like Opportunity Zones. Similar policies could prove to have far-reaching, positive effects on disinvested communities, and this analysis is just a start in exploring this possibility.