“This is Jack Kemp’s enterprise zones on steroids,” said Sen. Rand Paul, a Kentucky Republican, in his speech before the Detroit Economic Club.
On Friday, the son of Former Rep. Ron Paul made the best case for the Republican Party and libertarianism that Detroit, a city controlled by Democrats, will ever hear. In his speech he detailed his policy proposal to revitalize distressed urban areas across the country. This speech was paired with another speech Paul delivered to mark the opening of an African-American voter outreach office started by the Republican Party.
The tenets of Paul’s plan are that towns and cities in financial crisis, or with an unemployment rate 1.5 times the national unemployment rate (10.5 percent currently), or any deeply impoverished community might become eligible to become “economic freedom zones.”
In these economic freedom zones the federal income tax is reduced to a flat rate of 5 percent, as is the federal corporate income tax. Payroll taxes are cut to 2 percent for both employer and employee. Capital gains taxes, which capture investment income, are suspended.
And businesses might be able to deduct more of the cost on new equipment from their tax liability than is currently allowed.
Educational tax credits are provided to families within the zone. “This option would allow any individual, including distant family members, relatives and friends, to deduct up to $5,000 per child any cost associated with the education of an eligible student,” read a published outline of the plan.
A special visa can also be obtained by “entrepreneurial immigrants” who either invest $50,000 into these downtrodden areas, use $25,000 to rebuild and rehabilitate a property or have an advanced skill in a needed area (ex. M.A. in astrophysics).
Finally, Paul advocated the suspension of specific rules imposed on localities and businesses by the Environmental Protection Agency.
His ideas follow that of Former Rep. Jack Kemp, a Republican who also served as Secretary of Housing and Urban Development. Kemp devised the idea for enterprise zones, areas where businesses qualified for numerous subsidies (tax abatement, low-interest loans and reduced utility rates) in order to spur development.
As Paul said, he takes enterprise zones to an extreme. The problem is these enterprise zones do not work. That it is not to say there has not been economic expansion in these zones, it is that it is not consistent and the results are questionable.
There is a question whether these zones represent useful economic development, or money thrown at businesses to do what was already in their best interest. Moreover, money – or rather, cost – was completely absent from the speech. Paul discussed the wonders his miracle cure would do, but he did not mention how much it would cost.
Also, Paul’s plan addresses federal policy, which is misplaced, because while Detroit’s problems can be linked to the federal policy of free trade pacts with Canada and Mexico, it is ostensibly a local problem. Taxes are burdensome in Detroit, but it isn’t federal taxes that are the problem – it’s local taxes. The Lincoln Institute for Land Policy conducted a study, “50-State Property Tax Comparison Study,” in which it is shown Detroit has the highest property taxes of any other city in the country.
Not only is this tax burden a deterrent to commercial activity, it rests almost solely on poor residents – residents whose per capita income is $14,118 as of the most recent census.
Tax policy is another incorrect focal point. While the cut in payroll taxes should be pursued, whether you’re a business or a family, tax breaks matter little when you don’t have any profits and you don’t have any income.
The best policy to come from Paul’s proposal was the idea for a special visa for “entrepreneurial immigrants” who want to invest and live in cities in decline. This is what a city like Detroit needs. The city had a population of 1.8 million at its peak, and it is now 701,475. What Detroit needs is people. People to shop at its stores, people to pay taxes, people to fill tens of thousands of empty houses.
Despite these considerations of economic policy, Paul’s most important statements came when he discussed the U.S. criminal justice system and its disproportionate effect on the black community.
“We have to have a 21st century civil rights agenda with education, choice, voting rights and prison reform as its foundation,” said Paul. “No one’s life should be ruined because of a youthful mistake. No one should be thrown in prison for years and decades when they have not hurt anybody but themselves.”
“It does no good for us to create jobs for young people in Detroit, if they can’t later get such jobs because of an out of control War on Drugs,” continued Paul.
That is what it means to speak to the black community. Discuss issues that resonate. There is a reason that immigration policy is a top issue within the Latino community – because it affects their community.
Obviously, black Americans have the same capacity for conservatism and libertarianism that white Americans do. The problem with the Republican Party is that there hasn’t been much of an effort to speak to the issues of the community. Should more Republican officials take the tact that Paul has, and that means more than lip service, they’ll be more competitive with the black electorate.
The Democratic machine in Detroit will not be easily taken apart. However, if Millennials continue to move in and people like Sen. Rand Paul continue to talk with black voters, a libertarian Republican could conceivably win a seat on the city council if not the mayoralty.
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