President Bush's timely call for an opportunity zone for the entire Gulf region was greeted recently by a Washington Post editorial labeling it a "Go Go Zone." Apparently no good deed goes unpunished.
They wrote, inexplicably, that tax incentives offer breaks for investment but not for job creation. Did the Post editorialist ever take a look at the renaissance going on in Harlem, thanks to President Clinton's Empowerment Zone (a modified Enterprise Zone)? Have they looked at the low-tax industrial zones (maquiladoras) along the Tijuana-San Diego border? Have they noticed how low-tax, pro-business cities like Shanghai, Shenzhen, Pudong and Hong Kong are doing in China? Or Dublin, Ireland, or Dubai, UAE? The empirical evidence shows that while the president's opportunity zones need more tweaking, they will work.
Congress recently passed legislation extending limited tax relief to the victims of hurricane Katrina and Rita. They should immediately enact follow-on legislation with more juice to the president's opportunity zone idea of "green-lining" the entire Gulf Coast region as an enterprise zone with powerful tax and regulatory incentives to restore robust economic activity and jobs with homeownership and housing as key components.
During the next three years Congress should allow individuals and companies in the zone or anyone outside the zone investing in it to choose whether they want to pay taxes under the current Internal Revenue Code or under a simplified, pro-growth tax system. Individuals living or working in the zone could choose to pay a simple, low, single-rate tax that could be filed on a postcard, which would eliminate the capital gains tax.
Companies and home builders could choose to pay federal taxes under a streamlined federal tax system that would allow full, immediate write-off of all investment expenditures and inventory purchases, a full deduction for all dividends paid, no tax on capital gains. There should be no tax on low-income workers up to 180 percent of the poverty level. Where education is concerned, wider use of education and housing vouchers are also tools that can be used.
Finally, it is absolutely essential that Congress use this opportunity to create the president's urban homesteading program to give displaced and otherwise low-income people an opportunity to own homes. Thanks to the "Today" show on NBC, Warner Records and my friend Tim Blixseth, $25 million has been raised for Habitat for Humanity in just two weeks. "Operation Home Delivery" will send homes to the region in several weeks down the Mississippi River to the Gulf Region.
Many of my Republican friends are wringing their hands about the cost of undertaking these efforts. I agree that much of the cost could be paid for by reducing other nonessential discretionary federal spending - starting with repeal of the 6,000-plus pork-barrel projects contained in the recently enacted transportation bill - which has gotten completely out of control. I endorse the idea of across-the-board spending cuts on nonsecurity and nonentitlement accounts being proposed by congressional conservatives. The Republican Study Committee should be commended for coming up with Operation Offset, which identifies some $50 billion in corporate pork and $300 billion in overall discretionary spending that should be delayed, if not eliminated outright.
Is $100 billion to $150 billion a lot of money? Of course it is. But as my colleague at the Free Enterprise Fund, Larry Kudlow, points out, it is an amount our $13 trillion economy easily can shoulder.
As Kudlow points out, "Yes, the budget deficit will rise for a year or two, from roughly 2.5 percent of GDP to perhaps 4 percent. Big deal. The very bond markets that actually do the financing have shrugged the spending off, with Treasury issues continuing to trade around 4.25 percent. There was no 'spiking up' of long-run interest rates that might suggest a financial crisis. The stock markets, meanwhile, just registered their best third quarter in seven years."
If you want to see the best video of humanitarian assistance music in recent years, go to www.habitat.org and watch Wynona Judd, Michael McDonald, Eric Benet and Terry Dexter sing "One Heart at a Time." Let's match it with one Habitat home at a time until this renaissance takes place all over Mississippi, Alabama and Louisiana for the victims of Katrina and Rita. Let's combat poverty with education, homeownership and jobs.
