(CNSNews.com) – Sen. Rand Paul (R-Ky.), during a keynote address before the Detroit Economic Club on Friday, unveiled his plan to revitalize the city – which is $18 billion in debt – by setting up economic freedom zones.
Paul plans to introduce a bill next week which would lower personal and corporate income taxes in the city to five percent and the payroll tax to two percent for employers and employees.
“To thrive, Detroit needs less government and more freedom, less red tape, less punitive taxes, more money left in Detroit. The answer to poverty and unemployment is not another government stimulus. It’s simply leaving more money in the hands of those who earned it,” Paul said.
The proposed zones were inspired by former GOP vice presidential candidate Jack Kemp, Paul said.
“I told somebody recently, ‘This is Jack Kemp’s enterprise zones on steroids,’” the senator said.
“Economic freedom zones will cut out the red tape that keeps new businesses from starting and old businesses from thriving,” Paul said.
“Inside these zones, we’ll suspend the capital gains tax, encourage greater investment in business and real estate, and we will allow all small businesses to deduct most of what they invest in the first year of the purchase,” he added.
Economic freedom zones differ from traditional government stimulus, Paul said, because “these zones don’t ask Houston, or they don’t ask Atlanta to bail out Detroit. These zones free up Detroit to bail themselves out.”
The zones will not just be confined to Detroit, he said. Any city with unemployment greater than one and a half times the national average would be eligible for economic freedom zones.
“This isn’t just about Detroit. I’m a politician, so I’m also concerned about my home. We’re concerned about Kentucky,” Paul said, adding that there are 20 counties in the eastern part of Kentucky that are in a depression. “So this would be struggling communities across America. It would include many in my home state.”
“We’re concerned about any zip code with unemployment greater than one and a half times the average, so right now, any community in America with 12 percent approximately or more would be eligible for these freedom zones,” he added.
Paul calculated that his plan will result in $1.3 billion in stimulus that won’t come from any other city. It will come from the people of Detroit.
“So those who say, ‘Oh, it won’t work. There won’t be enough money,’ we’ve calculated it - $1.3 billion stimulus, not from Houston, not from Atlanta – from you. It’s your money. We’re not going to take it to Washington. We’ll leave it with you. How could anybody be opposed to this?” he said.
Paul’s announcement comes three days after a federal judge ruled that the city could use Chapter 9 bankruptcy protection to cut employee pensions and to continue negotiating with its creditors. The ruling is considered a blow to the city’s unions and retirees.