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Rand Paul wants big tax cuts for Detroit, other distressed areas

Rand Paul  (The Christian Science Monitor) Rand Paul  (The Christian Science Monitor)

Sen. Rand Paul (R-Ky.) announced Thursday that he will propose legislation that would cut taxes for Detroit and other areas of the country that are in dire financial straits, pitching the idea as an alternative to bureaucratic government stimulus programs.

Paul is traveling to Detroit on Friday to make his case. During a conference call Thursday morning, he said the idea (known as "Economic Freedom Zones") should satisfy both Republicans who like cutting taxes and Democrats who want to provide stimulus to areas such as Detroit — all without another government-funded bailout.

"What we hope to do is create taxes so low that you essentially are able to bail yourselves out, by having more money accumulate in the area over time," Paul said.

The taxes that would be reduced include the income tax, the corporate tax, payroll taxes and the capital gains tax. The bill would also lower the economic threshold for immigrants who want to start businesses in these areas to $50,000.

The legislation would apply to all areas of the country with an unemployment rate that is at least 50 percent greater than the national average. As Paul noted, it would include urban areas such as Detroit as well as rural areas like those in the eastern part of his home state, Kentucky. Economically distressed Zip codes in otherwise stable areas would also benefit.

A federal judge ruled this week that Detroit can declare bankruptcy.

Paul, a potential 2016 presidential candidate, said that taking the government out of the stimulus game would give these areas a better chance — with the free market essentially intact.

"A government stimulus takes money from one area of the country, brings it to Washington, and then somebody — a central planner — has to decide who to give it to," Paul said. "The problem is that central planners are never smart enough to know which entrepreneurs will succeed or which are the best in business, so they typically give it to the wrong people. In ours, basically it will go back to people who customers have already voted for."

The idea is similar in concept to the "enterprise zones" that former congressman Jack Kemp (R) once championed. Paul said his idea would be more long-lasting than Kemp's, which would give these areas a better chance to recover. (Kemp was known for his outreach to minority groups — an issue Paul has sought to address as well.)

Paul will speak Friday at the Detroit Economic Club. He said the bill will be introduced Monday.

Aaron Blake covers national politics and writes regularly for The Fix.



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Aaron Blake · December 4, 2013

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