Rand Paul, the beacon of small-government conservatism, has an idea to save Detroit. Paul’s solution to Detroit’s poverty, shrinking population, crime, blight, and bankruptcy is the same as Paul’s solution to virtually everything else: cut taxes. Michigan news website MLive reports:
Sen. Rand Paul (R-Ky.) plans to introduce a bill in Congress to create "Economic Freedom Zones" that would reduce taxes and ease government regulation in distressed areas, he announced in a speech in Detroit on Friday.
Paul said the measure would "leave over $1.3 billion in Detroit" over 10 years by slashing personal and business income tax to 5 percent, eliminating capital gains taxes and offering other incentives for people and businesses to move to designated zones that are in economic distress.
Unlike some of Paul's ideas, it's not completely wacky. Getting people to move to Detroit and start businesses must be one component of any plan to restore it to health. But there is a voodoo-economics quality to Paul’s proposal, similar to supply-side theories: If you tax something less, you will get more of it. With supply side, also known as trickle-down economics or Reaganomics, the idea is that if the federal government taxes income or investment less, the economy will grow more. The data and historical experience do not actually support that, unless you’re cutting taxes from an extremely high rate, like 90 percent, to a more optimal one. There is no evidence that a tax rate of, say, 25 percent versus 15 percent determines macroeconomic outcomes.