Senator Rand Paul (R-Ky.) has offered a proposal to cut taxes for economically troubled regions of the Nation such as Detroit, which recently filed the biggest bankruptcy in U.S. history, to create “Economic Freedom Zones” as an alternative to dumping grounds for government stimulus.
Paul’s proposed tax cuts would be applied in areas of the Nation where unemployment is 50 percent greater than the national average, in addition to cities that have filed or are at risk of filing for bankruptcy.
“Where we truly think this is different than government stimulus, is that a government stimulus takes money from one area of the country, brings it to Washington, then somebody — a central planner — has to decide who to give it to. The problem is, central planners never are smart enough to know which entrepreneurs will succeed… so they typically give it to the wrong people,” Paul said. “In ours, basically the money will go back to people who the customers have already voted for, businesses that are making a profit, a welding business in Detroit that has 10 employees. They’re the one that’s going to get the taxes back.”
Paul’s plan to reduce income tax, capital gains tax and payroll tax would empower residents to provide their own economic bailout by spending more and opening new businesses in economically troubled areas.
“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 Senator also said he will propose lowering the threshold to foreign investors coming to the country to pursue entrepreneurial endeavors on EB5 visas from $500,000 to $50,000 to encourage immigrants to start more new businesses in economically devastated parts of the country.
Other benefits of his plan, according to Paul, would include child education tax credits to increase school choices, discontinuation of longstanding policies that impede non-union competition and an elimination of “non-attainment designations” by the Environmental Protection Agency, which heavily regulate industrial emissions.
Paul contends that Americans in more economically stable regions of the Nation aren’t particularly keen on seeing Federal tax dollars used to clean up other cities’ economic messes.
“I think it’s also politically palatable, because I don’t think there is going to be any kind of impetus or a movement to have a bailout from one part of the country to another,” he said. “I think the idea of leaving money in Detroit that originates in Detroit could get legs with both parties.”
The Senator is slated to make a trip to Detroit next week to deliver a speech at the city’s Economic Club, during which he said he’ll officially introduce his legislative idea. The bill is slated to be presented to the Senate on Monday.
The trip to Detroit is also seen as an opportunity for the potential 2016 Presidential contender to expand the power of the GOP in Michigan, a major Presidential swing State, and make inroads with local business leaders.
“Republicans as a party, myself included, need to do more in the cities. I think, instead of just saying, ‘Hey, the free market lifts all boats,’ we need to specifically come in with plans for areas,” Paul told reporters. “Detroit’s got nearly 18 percent unemployment. We have counties in Kentucky that have almost 18 percent unemployment. We have places in our country that are really suffering. And I think we need something dramatic to be done. It can’t be the same old prescription that we’re trying to pass because that hasn’t worked.”
Detroit was ruled eligible for bankruptcy on its $18 billion in debts by a Federal judge this week.
The Michigan Democratic Party issued a statement Thursday criticizing Paul’s proposal as a “special interest tax handout” and lauding the auto industry bailout, which the Senator opposed:
Sen. Paul was a vocal opponent of the auto rescue, which saved over a million jobs, and led the Republican effort to shut down the government, costing Michigan’s economy hundreds of millions. His special interest tax handout plan is nothing new. Here in Michigan, Rick Snyder gave $1.8 billion to wealthy special interests, and paid for it with billions in devastating cuts to our local communities and public schools. It’s time for our elected leaders to stop the tax giveaways, invest in communities and improve education.
As the Federal government moves to sell its remaining shares in General Motors by the year’s end, American taxpayers are expected to take a $10 billion loss on the $49.5 million in Federal money invested to keep the automaker afloat.