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senate Bill S. 1852

Fighting Poverty by Empowering Entrepreneurs

Argument in favor

Encourages entrepreneurs and investors to buy into economically depressed communities and revitalize them, WITHOUT a federal bailout or stimulus.

Argument opposed

Economically distressed communities need more assistance than just tax breaks. Real changes will be achieved with government spending on infrastructure and public services.

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
    IntroducedDecember 18th, 2013

What is Senate Bill S. 1852?

By creating free market enterprise zones, S.1852 aims to facilitate job growth, entrepreneurship, and improve educational opportunities in economically distressed areas.

This bill designates "Economic Freedom Zones" that would be prohibited from receiving assistance from the federal government (e.g. loans, loan guarantees, or purchases). Economic Freedom Zones in S.1852 are defined as any state, municipality, zip code, or rural area that is:
  • a debtor in a bankruptcy
  • an insolvent municipality or state, (basically a state or municipality that is unable to pay debts as they come up)
  • eligible for bankruptcy
  • blighted with poverty and high rates of unemployement

After an Economic Freedom Zone is designated, S.1852 creates tax incentives for individuals and corporations to invest in them by establishing:

  • 5% flat tax rate on individual & corporate income in the zone.

  • 0% capital gains tax (CGT) rate (the taxes imposed on the profits from a sale of assets & non-inventory property — think stocks and bonds) in Economic Freedom Zones.

  • Reduced employment tax rates.

  • Increased allowance for business property expensing.

Economic Freedom Zones are also exempt from having to comply with some environmental regulationshistoric preservation requirements, and wage rate requirements under the Davis-Bacon Act.


Families & individuals who live in an Economic Freedom Zone, 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. 1852

A CBO cost estimate is not available at this time.

More Information

In Depth:

In addition to the breaks listed above, S. 1852 would also amend the tax code to allow for: 
  • A $5,000 tax credit granted to students living in Economic Freedom Zones who are attending elementary or secondary school.

  • The creation of a tax-exempt educational savings account for people living in Economic Freedom Zones.

  • A tax credit, rather than a tax deduction, for people who donate to charities that serve people in Economic Freedom Zones.

The Elementary and Secondary Education Act of 1965 would also be amended to give special grant funds to children whose families live in Economic Freedom Zones and for those with incomes below the federal poverty level.

And to widen the pool of investors, the Secretary of Homeland Security (DHS) and Secretary of Labor would be given the power to issue Special Economic Freedom Zone Visas to immigrants that meet educational & skill requirements that want to enter the U.S. to invest in Economic Freedom Zones.

Economic Freedom Zones aren’t a new idea. S. 1852 is in many ways, a revival of
Jack Kemp's "Urban Enterprise Zones" introduced during the Reagan administration in the 1980’s. These zones encourage economic activity by reducing taxes and regulations, while expanding educational opportunities. The concept reincarnated in sponsoring Rep. Rand Paul's (R-KY) bill has gained attention from the other side of the aisle with Sen. Cory Booker (D-NJ) and former Governor Jennifer Granholm (D-MI) expressing 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 — "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.


Press Release from sponsoring Senator Rand Paul (R-KY)

Economic Freedom Zone Policy Paper from Senator Rand Paul (R-KY)



Michigan Live

(Photo Credit: Bob Jagendorf)


Economic Freedom Zones Act of 2013

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 increased community involvement in bankrupt or economically distressed areas.

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