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senate Bill S. 790

Would 'Economic Freedom Zones' Drive Job Growth in Impoverished Areas?

Argument in favor

This bill would incentivize entrepreneurs to invest and create jobs in economically depressed communities to revitalize themselves, and it doesn’t require a federal bailout or stimulus.

Austin's Opinion
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08/10/2016
Make the entire country an ecnomic freedom zone already and diminish the size of the federal government.
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Ryan's Opinion
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08/10/2016
The entire country would be an economic freedom zone if the government wasn't so insistent on meddling in the market.
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NACSP's Opinion
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08/11/2016
Finally a solution to failed government spending programs. It's high time we realized that government regulation and high taxes are inhibitors to economic development, and hurt the poor more than schemes created by autocrats to redistribute wealth.
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Argument opposed

Economically distressed communities will need more assistance than just tax breaks. This bill doesn’t provide for government spending on infrastructure and public services.

Jimmy's Opinion
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08/10/2016
Tax breaks won't fix the infrastructure of these cities. Fixing the infrastructure will create jobs and help the city, this won't happen if we give more corporations tax breaks. They'll just take advantage of every tax break and all the exempts they will get from these "Economic Freedom Zones". They will basically turn into how they use to be under the control of the mining companies, being owned basically like slaves instead of being respected employees.
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08/10/2016
The answer to poverty and unemployment is not another government stimulus. It is simply leaving more money in the hands of those who earn it.
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Erin's Opinion
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08/11/2016
This seems like a bill that would be great for small businesses in theory, but in reality would just be taken advantage of by big corporations to increase profits. Improving infrastructure through increased minimum wage and more affordable healthcare would be better ways to address the root of the issue.
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What is Senate Bill S. 790?

This bill aims to facilitate job growth, entrepreneurship, and improved educational opportunities by creating "Economic Freedom Zones" in economically distressed areas. Individuals and businesses investing in those areas would receive tax breaks and would be exempt from complying with certain regulations.

An area designated as an Economic Freedom Zone would be prohibited from receiving federal assistance (e.g. loans, loan guarantees, or purchases). Economic Freedom Zones would be defined as a state, municipality, zip code, or rural area that is:

  • A debtor in a bankruptcy;

  • An insolvent municipality or state that can no longer pay its debts;

  • Eligible for bankruptcy;

  • Blighted with poverty and high rates of unemployment (defined as 1.5 times the national average or more).

After an Economic Freedom Zone is designated, this bill would activate tax incentives for individuals and corporations to invest in them by establishing:

  • 5 percent flat tax rate on individual & corporate income in the zone;

  • 0 percent capital gains tax rate on profits from the sale of assets and property in Economic Freedom Zones -- which could be tangible assets like property or intangible like stocks;

  • Reduced employment tax rates;

  • Increased allowance for business property expensing.

Economic Freedom Zones would be exempt from having to comply with some environmental regulations, historic preservation requirements, and wage rate requirements under the Davis-Bacon Act.

This bill amends the tax code to allow:

  • A $5000 tax credit for a student attending elementary or secondary school whose primary residence is in an Economic Freedom Zone.

  • A tax-exempt educational savings account for individuals living in an Economic Freedom Zone.

  • A tax credit, rather than a tax deduction, for contributions to a charitable organization serving individuals in an Economic Freedom Zone.

The Elementary and Secondary Education Act of 1965 would be amended to allow special allocation of grant funds to children whose families live in an Economic Freedom Zone and whose incomes are below the federal poverty level.

To widen the pool of investors, the Secretary of Homeland Security (DHS) and Secretary of Labor to issue Special Economic Freedom Zone Visas to aliens meeting educational & skill requirements who seek to enter the U.S. to invest in Economic Freedom Zones.

Impact

Families & individuals who live in an Economic Freedom Zone, prospective investors and entrepreneurs, areas designated as Economic Freedom Zones, state & local governments, the Internal Revenue Service, the Department of Education, the Department of Labor, the Environmental Protection Agency, the Department of Homeland Security.

Cost of Senate Bill S. 790

A CBO cost estimate is unavailable.

More Information

In-Depth: Sponsoring Sen. Rand Paul (R-KY) explained the goal of Economic Freedom Zones in a press release introducing this bill:

"The Economic Freedom Zones Act will allow impoverished areas to remove the shackles of big government by reducing taxes, regulations, and burdensome work requirements. These zones will give parents and students the flexibility to find better schools and provide incentives for philanthropy. By taking drastic, meaningful action, we can create new jobs and finally get these communities back to work."

Of Note: Economic Freedom Zones aren’t a new idea, and in many ways are a revival of Rep. Jack Kemp’s Urban Enterprise Zones introduced during the Reagan administration in the 1980’s. These zones incentivize economic activity by reducing taxes and regulations, while expanding educational opportunities. The concept has gained backing from Democrats as well, with Senator Cory Booker (D-NJ) and former Governor Jennifer Granholm (D-MI) having expressed support.

However, not all Democrats have warmly received Senator Paul’s bill. Congressman Carl Levin (D-MI) gave Paul’s bill a mixed review, saying that there needs to be more federal investment in infrastructure and social services. For his part, President Obama has introduced a similar mix of policies, calling his Promise Zones. The Promise Zones are similar in terms of their focus on reducing taxes and regulations, but they also allow for federal spending on housing and infrastructure.

The similarities between Senator Paul’s Economic Freedom Zones and President Obama’s Promise Zones led Democratic strategist Douglas Schoen to note that there is room for compromise, but it remains to be seen if that opportunity will be embraced.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user niiicedave)

AKA

Economic Freedom Zones Act of 2015

Official Title

A bill to provide for the establishment of free market enterprise zones in order to help facilitate the creation of new jobs, entrepreneurial opportunities, enhanced and renewed educational opportunities, and increase community involvement in bankrupt or economically distressed areas.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Finance
    IntroducedMarch 18th, 2015
    Make the entire country an ecnomic freedom zone already and diminish the size of the federal government.
    Like (85)
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    Tax breaks won't fix the infrastructure of these cities. Fixing the infrastructure will create jobs and help the city, this won't happen if we give more corporations tax breaks. They'll just take advantage of every tax break and all the exempts they will get from these "Economic Freedom Zones". They will basically turn into how they use to be under the control of the mining companies, being owned basically like slaves instead of being respected employees.
    Like (33)
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    The entire country would be an economic freedom zone if the government wasn't so insistent on meddling in the market.
    Like (56)
    Follow
    Share
    The answer to poverty and unemployment is not another government stimulus. It is simply leaving more money in the hands of those who earn it.
    Like (23)
    Follow
    Share
    Finally a solution to failed government spending programs. It's high time we realized that government regulation and high taxes are inhibitors to economic development, and hurt the poor more than schemes created by autocrats to redistribute wealth.
    Like (16)
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    How about we turn the whole country into an economic freedom zone!
    Like (14)
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    I read " more corporate welfare disguised as help for the working poor". How about just help the working poor instead of funding companies who never seem to help anyone except their top executives
    Like (12)
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    This seems like a bill that would be great for small businesses in theory, but in reality would just be taken advantage of by big corporations to increase profits. Improving infrastructure through increased minimum wage and more affordable healthcare would be better ways to address the root of the issue.
    Like (12)
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    EFZ may improve areas of poor employment. But will become a failure if the Feds spends taxpayers to improve employment. Let's not create another Detroit.
    Like (9)
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    How about killing off the spending that creates the need for the taxing that kills these areas? The federal government has added over 21 billion dollars in new regulations and increased burdens (obamafailurecare and mandatory wage increases) that just don't jive with creating new, good jobs. In order to fix this stop geographical corporate welfare and remove the taxes from all the players. Yes that means spending has decrease. Less money to buy votes with but its better for long term growth.
    Like (7)
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    Government is the number one prevention of economic growth. I'm all for these economic freedom zones. When they succeed, perhaps they will spread across the country.
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    In my opinion, the free market is the greatest driver of innovation and economic growth. Encouraging companies to go into distressed areas via loosened regulation and tax breaks seems like a win-win, for the businesses and the distressed areas.
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    I like the idea, Senator Paul, but it needs to cover the whole United States!
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    Enough money has been wasted on these communities. Let private corporations and investors step in. US tax payers have spent trillions to no avail to try and improve these communities. It is time they improve themselves from within. Finding their own sources of funding for entrepreneurship will ensure they will work harder to build their businesses
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    This is the only way to prop up impoverished neighborhoods. Get the government out of the way and let the free market work.
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    Seems logical to try a different method. The states are perfect for trying different methods (as determined by state and local governments). Getting big gov't out of the way for a bit and removing/reducing the burdensome taxes like payroll (essentially punishment for hiring), corporate income (just drives prices for the consumer up), capital gains (not punishing people for investing their money in business), and the overall cost - both monetary and in man hours - of regulatory compliance just might yield positive results. The current system of gov't subsistence isn't working for these folks. Grant these areas some latitude and they'll likely surprise you.
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    The only way to make capitalism diminish poverty is with this carrot and stick method. At the worst, this will create opportunities for those who seek it and will prevail over generations. I'm interested to see how those who oppose this justify an obvious method to reduce wealth inequality (assuming corporations only receive tax breaks for investments in that community and not overall).
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    Economically depressed zones are created by the "entitlement" communities themselves. Thus, they are unwilling to to earn their own way regardless of the location of the business. Major chains such as Target and Walmart have closed stores in these communities due to theft. Opportunities are irrelevant when no one is motivated to take them because it's already provided for free (but not for taxpayers) from the government. Communities reflect the standards and values of those living in them.
    Like (4)
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    How long will these zones last? How will you know that they are successful?
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    Wait wait wait... Are you saying getting rid of the burdening taxes will help rejuvenate struggling areas and provide more jobs?? #TaxationIsTheft And better yet why not do this across the country?
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