John E. Mogk

Sen. Rand Paul, R-Kentucky, stopped by Detroit to boost the state's Republican candidates and tout his "freedom economic zones" proposal as a solution to the city's economic ills. Paul's proposal is consistent with Republican philosophy. It would reduce or eliminate federal taxes on residents and businesses located in Detroit and other distressed cities. It is a proposal that I made a decade ago and could hasten Detroit's return to being a dynamic urban community by decades.

The private sector builds and rebuilds cities, not the government. Look no further than the dramatic improvements resulting from private investments being made by Dan Gilbert in the city's downtown or the Ilitch organization and a host of small entrepreneurs in Midtown. The same is true in Detroit's neighborhoods where the private sector is made up of property owners and small businesses.

Paul's proposal addresses the city's major challenges of lifting the local economy through private investment without requiring any resources or tax dollars from the city. It is essentially a major federal grants program with no administrative costs that would dramatically increase Detroit's local tax revenues.

Federal tax dollars left in the pockets of Detroit residents would be spent in preserving homes, meeting family needs and supporting local merchants throughout Detroit. The outflow of residents and business would be converted to an inflow as everyone would think twice before moving from the city to face paying federal taxes.

Consider a federal income tax credit of up to $500,000 for residents and $5 million for businesses. Residents would be drawn to the city for federal tax relief, increasing population and income levels and helping to stabilize struggling areas of the city. Businesses would be incentivized to expand or relocate to Detroit from all corners of the country, increasing the city's employment base and helping to alleviate an unemployment rate that is one of the highest in the nation.

The ultimate effect would be to curtail urban sprawl, preserve the urban infrastructure and increase the region's density, allowing for shorter commuting times and greater support for public transportation.

But what about the large percentage of Detroit's residents paying no federal taxes at all? Their current assistance payments would remain unchanged and they would benefit from expanded job opportunities, a strengthened city tax base and increased outlets for goods and services. Social service organizations would have a broader population upon which to draw for charitable contributions of time and money to help Detroit residents in need.

With the many benefits for Detroit offered by Rand Paul's proposal, it is surprising that it gained little public support during his stop. No doubt, the proposal is considered infeasible by some and politically distasteful by others.

But the proposal has the potential for accelerating Detroit's population growth, economic prosperity and diversity like no other federal action. It deserves serious consideration and support from Detroit's leadership.

John E. Mogk is a professor of law at Wayne State University Law School.