The economic impact of the Gulf Opportunity Zone Act of 2005

Politicians utilize tax policy investment incentives to foster economic growth and stimulate investment. On December 21, 2005, President Bush signed the Gulf Opportunity Zone Act of 2005, otherwise known as the GO Zone Act. The GO Zone Act provided tax incentives to stimulate economic growth and assist in the recovery and rebuilding efforts. This research evaluates the economic impact of tax policy investment incentives provided by the GO Zone Act of 2005. Congress continues to use tax incentives to stimulate economic growth even though empirical research on the impact of incentives is inconclusive.;Prior literature supporting the neoclassical theory of investment behavior suggests that tax investment incentives that reduce the cost of capital should increase investment spending and spur economic growth. The purpose of the research is to assess the effectiveness of tax policy investment incentives at the regional level and to examine whether these regional incentives create economic growth within policy coverage areas at the expense of the surrounding regions. Specifically, this study addresses the following research questions: 1) Do tax policy investment incentives promote economic growth and spur business investment spending at the regional level? 2) Are regional tax policy investment incentives a zero-sum game, where growth in one local area comes at the expense of reduced growth in other local areas? The research questions are tested utilizing linear mixed-effects modeling, multiple ordinary least squares (OLS) regression, and binary logistic regression on a matched sample panel data set using observations from 2002 through 2008.;Results indicate that the regional tax policy investment incentives provided by the GO Zone Act did not generate significant increases in key economic indicators included in this study. These tax incentives were intended to accelerate capital spending and spur economic recovery, but do not appear to have had the desired impact. In addition, the results do not indicate that the tax incentives provided by the GO Zone Act has had a statistically significant negative impact on the surrounding region.