Sen. Rand Paul, R-Ky., has come up with a new prescription to heal a bankrupt Detroit that would allow the city to “bail” itself out.
In a conference call with reporters Thursday, Paul said he would unveil legislation Monday to cut taxes for Detroit and other economically depressed areas with unemployment rates one-and-a-half times greater than the national average.
“What we hope to do is create taxes so low that you essentially bail yourselves out by having more money accumulate in the area over time,” Paul told reporters Thursday.
Paul’s plan, known as Economic Freedom Zones, would lower the corporate and personal income tax rates to 5 percent, eliminate the capital gains tax and lower the payroll tax. The bill would also lower the investment threshold for immigrants who want to open businesses in economically distressed areas from $500,000 to $50,000.
“Where we truly think this is different from a 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,” he said. ”In ours, basically the money will go back to people who customers already voted for, businesses that are making a profit, a welding business in Detroit that has 10 employees. They’re the ones that’s going to get the taxes back.
“I think it’s one way that’s also politically palatable because I don’t think there’s going to be any impetus or movement to have a bailout in one part of the country to another,” he said. “I think the idea of leaving money in Detroit that originates in Detroit I think could get legs with both parties.”
Paul, a potential 2016 presidential candidate, will take his sales pitch directly to Detroit Friday when he addresses the Detroit Economic Club. He will also help open a Michigan Republican Party office in the city.
“You look at the red-blue map of the United States, almost all the rural small cities are red, and almost all the big cities are blue,” Paul said. “I think Republicans as a party, myself included, need to do more in the cities, and I think instead of saying, hey, the free market floats all boats, we need to specifically come in with plans for areas.”