By Todd Spangler -Detroit Free Press Washington Bureau
WASHINGTON — U.S. Sen. Rand Paul, R-Ky, followed through on a promise made to a Detroit audience earlier this month and introduced legislation Wednesday that would reduce federal taxes and regulations in zip codes with unemployment greater than 1 ½ times the national average.
Paul unveiled the proposal before speaking Dec. 6 to the Detroit Economic Club. During that speech, he said his legislation creating what he calls Economic Freedom Zones would see federal income and corporate taxes cut to 5%, and federal payroll taxes reduced to 2% for employers and employees.
He said at the time it could save Detroit — which is in the midst of the largest municipal bankruptcy in U.S. history — some $1.3 billion over a decade’s time, though any such proposal would be expected to have a difficult time getting through Congress, with Democrats unlikely to support a plan to cut taxes for higher-income individuals and businesses.
Senate Minority Leader Mitch McConnell, also R-Ky., joined Paul as a co-sponsor of the legislation.
“The answer to poverty and unemployment is not another government bailout. It is simply leaving more money in the hands of those who earned it,” Paul said.
Paul, who is widely considered a possible presidential candidate in 2016, famously said any move toward a federal bailout of Detroit would only occur “over my dead body.” His legislation expressly prohibits any such federal aid for a state or municipality which is insolvent or sees its debt fall below a certain investment grade.
That prohibition includes federal loans or the purchase of any municipal or state debt obligations, as well as entering into any “assistance arrangement, including a grant program” with a struggling city or state.
Besides paying a flat 5% tax on income and corporate revenues, areas designated Economic Freedom Zones would carry no capital gains taxes, see reduced payroll taxes and be suspended from meeting certain environmental protection regulations, among other changes.
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