Rand Paul is presenting himself as a new Republican presidential candidate able to attract constituencies usually out of the grasp of the GOP, but on economic issues his young campaign platform contains a few familiar and tested Republican ideas.
His most developed proposal, a plan to subject the Federal Reserve’s monetary policy deliberations to a policy audit by the Government Accountability Office, is one that is relatively new to the mainstream but in line with his father Ron Paul’s decades-long crusade to end the central bank. The Fed’s finances and credit programs are already audited by the Office and by an outside auditor, but the concept of auditing the Fed is one that polls well across the ideological spectrum.
Other major agenda items Paul spelled out during his campaign announcement this week, however, have been staples of previous GOP campaigns.
On taxes, Paul proposed the “largest tax cut in American history,” instituting a flat tax of 17 percent and implementing a low one-time tax on the $2.1 trillion of profits held by U.S. companies overseas.
The flat tax, long the dream of right-of-center policy advocates, would simply tax a certain percentage of income. It would exempt a certain amount of income, meaning that the tax would be progressive, although likely not as progressive as the current tax code.
Many Republicans have endorsed the flat tax since the publishing executive Steve Forbes made it the centerpiece of his 1996 run for president.
“The flat tax isn’t new, but it is bold and it would be new if we ever adopted it,” said Daniel Mitchell, a senior fellow at the Cato Institute, a libertarian think tank in Washington, D.C.
“I don’t think you need something new as much as you need something semi-bold that holds up under scrutiny,” Mitchell said, arguing that the flat tax would address the shortcomings of the current tax code, including double-taxation of business income and distortions created by the multitudes of breaks and credits.
Paul’s tax proposals were initially outlined on his new campaign site, but the section on taxes was removed as of Wednesday evening. A spokesman for Paul’s campaign said that the campaign’s tax plan would be announced in the “near future” and that he couldn’t comment on details before then.
Part of Paul’s effort to broaden the GOP’s tent during his Senate tenure has been his policy ideas relating to poverty in inner cities and rural areas. In his announcement speech he touted the concept of “economic freedom zones” that would “allow impoverished areas like Detroit, West Louisville, Eastern Kentucky to prosper by leaving more money in the pockets of the people who live there.”
Paul’s economic freedom zones, as described in his previous legislation, are modeled after the “enterprise zones” designed by the late conservative policy guru Jack Kemp. They would drastically cut taxes and regulations imposed on areas suffering high poverty or fiscal stress.
Yet the idea is not new, having been championed by Kemp throughout the 1980s. Last year, President Obama also adopted the idea of location-based anti-poverty initiatives, rolling out “promise zones” targeting job-training, after-school learning, and other programs to troubled spots.
Enterprise zones have been around long enough to have a track record, one that is mixed at best.
In recent years California has discontinued its experiment with enterprise zones offering tax credits for hiring in poor areas that began in 1984.
“The bottom line is that enterprise zones were very expensive and they didn’t work,” said Kristin Schumacher, a policy analyst at the California Budget & Policy Center, a nonpartisan think tank.
Before being discontinued, Schumacher noted, the zones were expected to run the state about $1 billion annually. Yet state and outside assessments found no evidence that the program promoted business development or created jobs, the mechanism by which it was supposed to alleviate poverty.
The program was poorly structured, Schumacher said, and “didn’t create any really strong accountability or record-keeping measures.”
While the research on California’s program suggests that it didn’t live up to its promise, Paul’s plan would go significantly further, cutting individual and business tax rates, as well as payroll and capital gains taxes. It would also loosen environmental and land-use regulations, essentially betting that much less interference and taxation from D.C. would allow the economic freedom zones to succeed where other efforts have failed.
