leon panetta of disloyalty. hillary clinton was as loyal as one could be given this team of rivals it was created. they all effectively criticized the very strong terms president obama's leadership. what explains that? what explains it is their interest in the united states playing it better and more effective role in the world. [applause] they were willing to come out and put aside their own precedence in order to make that point. listen to them more than you listen to us. >> fareed your closing statement please. three minutes is up on the clock. >> i wanted to reiterate something that anne marie said. this is important. we have all had a lot of fun and it's been a great pleasure and i've been outed as a colleague republican. i wasn't actually a republican because i wasn't a citizen of the united states in those days.

but i submit to legalism. what i want to talk about is the world that robert kagan and bret stephens once that is undergirded by american power and i think that is the world we all believe has been vastly beneficial for the united states, for canada but for by and large the whole world. it allowed the transformation i talked about are not in america. the question is what is made that possible? i would argue the image you should think about is franklin roosevelt after winning decisively in world war ii. decides he wants to create the united nations an institution which all countries would be represented and try to make a systematic and institutionalized effort to produce a new kind of global politics in which other countries are respected, their voices heard and that is really

what the united states has at its core been trying to do since 1945. it's not really because the united states has gone into lots of third world countries and intervened and beaten up people and killed leaders that global order has been secured. it's because of his positive vision of building institutions of peace and prosperity that the united states has been able to preside over this world. and a crucial part of that has been an element of restraint that the united states has had, not using its awesome powers to get its way on everything, trying to do things multilaterally, trying to find ways to do things diplomatically rather than militarily. that has been so much a part of the american tradition. yes the united states has intervened in some places and by the way it is not clear to me by sending half a million troops into vietnam early upheld the global order but it is clear to me that creating the u.n., the world bank, the imf the bretton

woods has been a crucial part of it. when obama represents really is the liberal international tradition and i think it should find a voice in canada because you understand. look how you responded to this recent horrible terrorist attack. you are stoic and resilient any bounce back. he didn't didn't go and invade two countries. god knows you are pretty good army. it's that kind of restraint, is that kind of sober minded sensible intelligent foreign policy that obama represents so i guess what i'm telling you is he is sort of a closet canadian. vote for him for god sakes. [applause] >> bret stephens you get the final word in this epic today. >> the last i checked canadians were bravely joining coalition forces to bomb isis. [applause] i commend canada for being such

a core member of western alliance which has held peace prosperity and freedom for the past 70 years. now fareed mention my book and i am glad you are enjoying it so much. [laughter] i want to talk about my focus because what's clear to us here is that the united states needs to find a goldilocks recipe between the access of idealism which typifies save johnson in vietnam or george w. bush in iraq trying to be the world's priests to change hearts, to save souls, to make the world safe for democracy that wilsonian tradition and then what i would call the coldhearted realism and the timidity that has typified the obama administration. you have heard a wonderful universe described today about this peaceful world where our

only problems are in the middle east. there's that little thing in ukraine but you know whatever air defense identification zones in the south china sea whatever come it's a scary world so how do we chart a course between the bush excesses and a lack of imagination, vision, courage and initiative that i think has typified the obama administration? that is what my book is about. now something amazing happened in america in the last 25 years. what happened is our crime rate or murder rates which were so staggeringly high in the 1970s and 1980s went down and they went down because american police departments adopted what was known as broken windows policing. they observed that if a single window was broken in a the neighborhood it's a sign that nobody is in charge so it's an invitation to break all the rest of the windows and to create disorder, and disorder,

criminality. they are not just causal, they are environmental. the argument i would make tea tonight is a something like that is happening in the world too. there were no consequences for assad in syria. there were no consequences for putin in georgia are in ukraine and we now live in a place where no one is in charge, where the united states is afraid to intervene in all circumstances and they can do what they want. we are entering into a broken windows world. we need a foreign policy that understands that the role of a great power is to maintain order as a policeman not as a priest to be the man on the corner who is reassuring the good, deterring the tepid and punishing the wicked. i look forward to a president who does that. [applause]

>> strong closing statements all and debaters wow was a significant and important debate we had tonight. let's give them a big round of applause. [applause] and again a big thank you to the aria foundation. this is their 14th consecutive debate, a huge crowd here in toronto. peter and melanie, thank you guys. [applause] now the second audience votes so before you do that as a group we are going to review again how you voted at the beginning of tonight's debate. so the supports agree disagree on the motion. i call that is split.

43-57 that have supported on the con side and in the percentage that would change their minds, sky high. i have never seen that at the month today so this room isn't really play tonight and the final outcome ladies and gentlemen is your hand is in the balance that's attached to each of your programs. for those of you watching on line you can vote on our app www.munk debates.com/vote. let's go to the reception, the lobby right now and we will release the results shortly after 9:00 p.m.. ladies and gentlemen thanks for a great debate. [applause] thank you guys. ♪ ♪

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this week congress is waiting for possible action by pressing up on immigration. looking ahead at the present schedule for this week to save president obama participates in an ambassador credentialing ceremony in the oval office

marking the formal beginning of a foreign ambassador service in washington. wednesday the president hosts connect add to the future a conference with education officials from across the country about transitioning to digital learning. thursday mr. obama awards a new class of recipients of the national medal of science and national medal of technology and innovation. and on friday the present attends meetings at the white house.

next a discussion on a national sales tax and potential economic benefits of replacing the current income tax. congressman rob woodall who chairs the republican study committee joined members of the national small business association and americans for fair taxation at this event from the heritage foundation. it's just over an hour. [inaudible conversations] >> we welcome those who join us on our heritage.org web site and c-span on this occasion could i would ask everyone in the house to check their cell phones have been turned off as a courtesy as we prepare to begin an way to

remind internet viewers that questions can be submitted at any time simply e-mailing speaker at heritage.org and we will post the program on the heritage homepage following today's presentation for everyone's future reference. hosting our discussion this afternoon is david burton senior fellow for economic policy in our institute for economic freedom and opportunity. he focuses on tax matters, securities law entitlement and regulatory and administrative law issues. before joining us at heritage his professional career includes serving as general counsel at the national small business association and chief financial officer and general counsel of the alliance for retirement prosperity. he was also a partner in argus group of virginia-based public policy and government relations firm. please join me in welcoming david burton. david. [applause] >> welcome.

it will lead to a number of conclusions about tax policy. first a tax system will raise the revenue necessary to fund limited government with the least economic impact that can be achieved. this is accomplished by the texas on minimizing the appearance with free markets to minimize the compliance cost to taxpayers and to minimize tax administration costs. this in turn will lead to the highest level of economic output, economic growth come innovation, opportunity job creation real wages and prosperity that's possible when raising a given amount of revenue. second the conservative tax system should seek to limit the tax system adverse impact on civil society including the family in voluntary associations such as religious and educational institutions, charities and community organizations. third a conservative tax system will be judged to the just

political order that protects individual rights to life liberty and property adjust taxes to minimize the derogation of those rights by imposing an equitable and reasonable burden on taxpayers being general and application the special privileges and respecting taxpayers rights for due process and lastly the conservative tax system should be visible and understandable so as to actually convey the true call to government and the public. this analysis leads to a number specific policy recommendations. the conservative tax system would impose one flat or proportional tax rate neutral towards state investment or stated differently tax consumption. it would exempt the poor but only the poor from tax. would not impose a marriage penalty and it would provide tax relief for families and children and would not impose taxes on the poor voluntary associations that constitutes civil society.

there are four ways to satisfy economic criterion. a flat tax for consumed income tax the business transfer tax or a national sales tax. today we are examining the case for national sales tax. the first national sales tax was introduced by congressman dan shafer and billy koza and in 1996. in 1999 representative john linder introduced the fair tax. the primary difference between the two plans is that the fair tax has a somewhat higher tax rate, statutory tax rate to raise the same amount of revenue. john linder is retired. congressman rob woodall is today the lead sponsor of the fair tax and the fair tax of 75

co-sponsors and in terms of cosponsorship it is by far the leading proposal in congress. today representative woodall was because and answer audience questions and get back to his work in congress. then we will have to excellent panelists todd mccracken who was present at the national small business association and karen wall they do is research director of americans for fair taxation. after their remarks we will have an additional question-and-answer session. session. one final note the heritage foundation is doing a series of events on by mental tax reform in the various issues of various tax form plans. we have two events coming up in the next months. on december 3 at 11:00 a.m. dr dr. loren cutler will be speaking on tax or form an economic growth and on december 10 former cbo director and tax foundation president

scott hodge will discuss how we might improve the tax process. our speaker today is representative rob woodall. he represents the seventh district of georgia and serves on the house rules committee the budget committee to committee on oversight and government reform. he also serves as chairman of the republican study committee. he is born and raised in georgia and received an undergraduate degree from furman university and his law degree from the university of georgia. i would ask that you don't hold it against him that he is a lawyer. he was congressman john linder's chief of staff elected to congress in 2010. i've known congressman for a long time and i can say with conviction that there is no better friend to the american taxpayer than congress. he is the tip of the spear in the struggle of tax reform pays a tireless articulate and effective spokesperson for tax reform and i very much look forward to hearing what he has to say today. thank you congressman.

>> please joining me in welcoming congressman woodall. [applause] >> i can tell you that the night that i was elected four years ago my mother looked at me and she said rob you have gone from being my favorite son to a lawyer to being a congressman. just please don't go to jail. there is nothing that i can do to cheer up the rainy jury day in washington d.c. that would affect me more than to talk about fair tax. it is amazing to me that the ability to dream the big dreams seems not to be possible in this town anymore. it's hard to get something passed that nibbles around the edges. how do he get something passed that changes the way we think about our taxes? think about her relationship with the american tax collector. what i love about the fair tax, the fair tax didn't come from

washington d.c.. the fair tax came from a group of civic leaders in texas who had some success dealing with texans tort reform issues. she now know doctors are flocking into the state of texas to practice because they were able to succeed in making medicine work for doctors and patients. these civic leaders got together and set up we can do that for the state of texas what could we do for america as it relates to a tax system? how do we keep america competitive? let's start with a blank sheet of paper and see what happens next. and that makes all the difference. not some of the difference, all the difference. i put a charge of the shows the average corporate tax rate so oecd in the country and graft graph that compared to the american tax rate and then go back to the 1980s to 2010. every tax reform proposal

purports to deal with this tremendous disadvantage that america has an international marketplace. but i put this up because it's striking to me that in these past two years we have had a chairman of the ways & means committee that has done more for tax reform and any other chairman in my memory. going back 20 years. i can never think of a chairman that has worked harder to make the tax code make more sense for the american consumer and the american family and the american business then has dave camp for michigan. he is retiring at the end of the series you will know. we will lose a tremendous talent and dave camp. but when he got together to take on the most ambitious reform of the tax code that i have seen in my lifetime he said let's see if we can get the corporate income tax rate down to that oecd country average that world international average. that's a weakened get in there with everybody else.

that is striking to me because it is the best effort again that i have seen in my lifetime and it was an effort to see if we could be right there in the middle. they can be mediocre. i don't know when it became true in america that we set our goals on doing something greater goal is to be like everybody else. how it came to be that in america we decide we want to make a difference. we look at what everybody else is doing and let's be the same. i don't want to be the same. i want to lead. what we do with the corporate income tax rate in the fair taxes taxes take it to zero for one reason and one reason only and there it is there is not a business on the planet that pays taxes. as you'd know. as you know businesses collect taxes, final consumers pay taxes. walmart doesn't pay taxes. walmart collects the tax for me when i shop at walmart. the case for the fair tax is

that it is the only tax being discussed that does two things. number one the only tax being discussed that completely eliminates hidden taxes and everything that we buy and you know how easy it is to get elected to congress if your campaign promise is i'm going to take personal income tax rates down to zero and i'm going to make those big -- big bad corporations pay the bill. you know how easy it is to run as a campaign slogan? that's nonsense but we can hide hide taxes from the american consumer and we do it day in and day out. say only tax that makes transparent but the burden is on the american consumer. what is the cost of government today? why do you think about that? the fair tax rate is set at 23%. to big numbers scares me sometimes i think about it. i'm not proud about telling people that i support a tax bill that will create a 23%

consumption tax that the reason we do that is because that's what it cost to fund the united states government as it exists today. the fair tax is not about shrinking the size of government. it's about fixing our tax code so we can grow the size of the economy. 23% happens to be what that marker is. we are the only ones who are honest with folks about what that number is. it's too obliterated. if it's too high a let's lower it. we can be honest about what the size and scope of government is. the second thing the fair tax does ersap splay no tax proposal that it proposes to and make the payroll tax. when i go into high schools and talked with senior classes they will talk about their part-time jobs. they know all about taxes now. they didn't know about taxes before they took on a part-time job that they know all about taxes now. the one they want to know about is the one called fica. what in the world or did they

getting for that? i don't know if you have looked at the numbers that payroll tax is the largest tax that 80% of american families pay. think about that. how many thanksgiving and christmas dinners will be interrupted over the next 60 days with talk may i say arguments about income tax is? griping about income taxes, frustration about income taxes. i can't tell you how many there will be that there will not be one conversation about the payroll tax even though that's the largest tax that 80% of americans pay. if you want to get the tax man off of the american entrepreneurs off of the american families backs and if you want to create that thirst for production that i think it's inherent in the american psyche you got to eliminate the largest that -- tax and that is the payroll tax. people think about sales tax is being -- it's the only proposal

and all of washington d.c. proposes to eliminate that tax burden that is the highest tax burden for 80% of american families. we tried the income tax row. this chart on the wall shows the top marginal income tax rate going back to the candidate administration. john kennedy cut the top marginal tax rate from 91% down to 70% but he didn't bring any more money. across the top five graphed marginal tax rates across the bottom individual tax receipts. i need to give credit where credit is due. the heritage foundation production in this group of economic charts to help people to understand the impact of washington's decisions on our economy, on our families and businesses. this comes from their collection. what you see here is a does not matter how high or low the income tax rate is. america's only willing to give

you so much. the largest change in individual tax receipts came during the clinton administration not because the tax rate change but because the economy was on fire during those years and it turns out if folks are making more money they were spending more money and paying more taxes. the secret to bring in more revenue is a bigger economy not a higher tax rate. the fair tax defines that, exemplifies that in ways that so many other programs miss. i take it back to 1997 in the midst of this giant economic explosion. the joint tax committee at a symposium on how to model the consumption tax is hard for me to get the fair tax course because it's not just nibbling around the edges. it's something completely different than we have ever done before. joint taxes analyst from the left across the political

spectrum a different macroeconomic groups and tell us how you would model a switch and america to consumption tax like the fair tax. they all went out and they came back months later. they all came back with different numbers as you would imagine. the one thing these macroeconomic analytical groups agreed on is the american economy would grow faster under a consumption tax than under the current tax system. the liberals thought it would go -- grow faster but they mer merit -- their agreement as we can do better and it has to do with getting us out of business of the marginal tax rate. also out of business of tax expenditures be. people ask what's the biggest challenges in getting their fair tax passed? the biggest problem we have in

getting the fair tax passed as all the people that are really smart or washington d.c.. turns out if you are smart you have an idea about how we can use the tax code to make somebody else's life better. everyone in this room has an idea about how only we manipulate the tax code in this way or that way we can affect the behavior of america and that would make america better. tough tax expenditures in the budget employer-provided health care preferential rates for dividends and capital gains down to medicare benefit exclusion for pension savings and the unearned income tax credit. the fair tax goes to zero tax expenditures, zero exemptions, and if you don't turn the whole system on its head is hard to change the association that folks have with these tax expenditures and their quality of life. asked when he was testifying before george bush's tax

advisory commission they say what would be the easiest way to make sure that we don't have a new tax code littered with these exemptions? and he said start out with the tax code that has absolutely none. start out for tax code that has absolutely no exceptions exemptions special carve out because if there's a good reason to put one and i could make a good case for two, three and then for going five and that's the way we arrived at the tax we have today. i don't dispute that there is value in each one of these tax expenditures. what i dispute is that the tax code is the best place to implement social policy great social policy is the best place to tax policy is the best place to collect taxes. fair tax no deductions, no exemptions but paid that fair tax on absolutely every new good or service that i've paid by.

eliminating distortions from the economy, huge, huge difference in terms of utilization of capital. this one is entitled america is self-destructed put together by the tax foundation. the tax foundation in chino annually ranks folks on tax competitiveness. our friends in estonia are number one on the list. the united states is at number 32. i don't believe there is a worker in the world that works harder than the american worker. i don't believe there's infrastructure in the world that is better than infrastructure and notably there are people in the planet more committed to economic success and they tried that one entrepreneur at a time. i don't think anyone does that better than we do but we have handicapped ourselves and the fair tax aims to wipe that slate clean. if you have been in this town for a while you have watched all the vaccinations of trying to get a tax code to the american

board. many folks who are in the currency business save the sort that out in the private. currency is not that big of a tail but it's a big enough deal that most countries in the world are focused on receiving it. how do we keep our tax consequences from burdening the disney are shipping overseas? those countries that use taxes come here tax-free. it doesn't just remove income taxes from the rise of production but would move payroll taxes from the price of production as well. i go back to that chart we looked at on the top marginal tax rate. at its most volatile, at its

most volatile that period of time between 1990 and 2000 because the economy grew so fast we had 3% -- at a 3% to our individual tax, 3%. in a best-case scenario of the past 90 years we added 3%, not because of different rates but because of a better economy. our economy is out of whack today in a way that 3% want do it. our revenues and expenses are out of whack in a way to 3% want to do the best solution we have is a growing economy and everyone agrees that the consumption tax will bring us closer in that direction. i will close with this. it's interesting to watch what happens across the street in the capital with the members voting card in your hand. and what happens and i should have intuited and i didn't.

what happens is when things are going well all of those smart people i told you about have lots of places they would like to spend the extra money in good places. spend it on children in daycare. spend it on children and education. spend it on children and higher education. spend it on workers and retraining. the list goes on and on, things that you and i would contribute out from pockets because they are worthy. when the economy's going like gangbusters and we are bringing in money hand over fist those paychecks get bigger and federal receipts get better. but when the inevitable cycle calms and those receipts shrink because paychecks shrink and job shrink we have now become accustomed to a brand-new level of spending and we borrow until we get back into another cycle

where amplitude of tax receipts goes even higher spending even more money. the amplitude of volatility of income taxes compared to sales taxes is night and day. the enemy of the federal budgeting process isn't that we don't have enough money one year. it's that we have much much too much for the next. smoothing out that volatility, having a more predictable revenue stream makes all the difference in federal budgeting policy. fair tax, consumption taxes provide that certainty in ways that income taxes never can. again you are making my day better but i'd didn't come your talk about federal policy. we can talk about federal policy which would make my day worse instead of better.

i'm here with three of the finest minds you can have on this. they were the folks i met when i came to capitol hill. they have more of a tax machinations than i'll ever know. todd is leading a group that knows you make big changes from the grassroots up and has been involved with folks back home and around the country making decisions. i have known him and karen waldie, doing the predictive work, i dare say not the glamorous work of the fair tax grinding through numbers after numbers after numbers and putting it in terms that the rest of us can understand makes all the difference in the world and i'm grateful to her. just to be clear i am the guy who introduces the fair tax law on capitol hill. i'm the guy that adds the

sponsors to the fair tax on capitol hill but it's the grassroots mall across the country that will pass the fair tax on capitol hill and every time you see a member of congress who has added their name as a co-sponsor you know it was not because of my power of persuasion, not my charisma but the group of constituents back home that say you know what there's a better way and is called the fair tax and i want to work with you to get it done. we now have more courageous co-sponsors than any other fundamental tax reform bill on capitol hill. and it matters. anything on anybody's mind? >> i'm generally pleased with the affiliation. >> board chairman. i wanted to ask about the income -- impact.

maybe one of the things the average joe on the street doesn't know and those of us who watch numbers by having a designated trust fund and designated tax we can see the imbalance. if you get rid of the payroll tax and funded out of general tax than some of that sense of that gobbling up all the tax income for having a shortfall goes away. at the end of that? >> laurie you remember president bush was going to take on tax reform and social security reform. he chose social security reform and it was a difficult not many folks today can tell you what progress was made in his four years. we didn't want to have to take him both at the same time. both of them are critical and both need to be taken on. we have tried to just take on tax policy and leave the social policy of social security for

another day. to do that then we locked in based on payroll as it exists and as it changes. we locked in a formula that says the social security trust fund will continue to receive exactly the same revenues that it would have received had we continued to funded under payroll formula but again payroll has proven inadequate to fund social security system. rather than tie the fitness of the social security trust fund to the payroll base i want to tie it to the size of the economy which is what we do in a fair tax world. we can roll the receipts we have preventing bankruptcy would not be the right terminology that we -- our options for dealing with social security's fiscal future will be better if we have a wider revenue stream coming in. if i could choose one of the easy things a low-hanging fruit that we could do over the next two years passing tax reform

requires a president who believes in tax reform and i hope you can have that but we all know what it takes to solve the social security problem. we have to do something with benefits or something with revenue. my great hope is that we will take some of the early steps to solve that issue in these next two years. we can tie the fair tax into the two. most folks don't understand the progressive nature of social security payments and if young people today are saying they are more likely to see it in their lifetime and a social security check as we know who they are the time to have that on this conversation would focus on what his options are in the future is now. >> farmer retired citizen. he talked about the fair tax

being revenue-neutral. how does that change the distribution? >> when dave camp set about doing fundamental tax reform a committed himself to keeping the same distributional analysis that we have today. it was incredibly constraining. when the top 1% of income earners are paying the bulk of the taxes today they won't be doing the bulk of consuming tomorrow. rather than target trying to keep the entire distributional table the same we try to target improving the distributional table for the lowest income americans. when i think about who needs attention from the tax code is often not those folks who are being brought down by the tax code. it's the folks the tax code

isn't letting them get up. when i'm a high earner i can adjust the tax code and bring it to the lowest rate possible which is why when the top tax rate is 90% americans were paying more than one of top tax rate was 20%. low income earners don't have many choices. all they can do is go to work for a paycheck every day. eliminating the payroll tax changes the distributional ballots in no way that any proposal does. president bush's advisory panel released their july 2005 report and found that no proposal they were examining did more for rural income americans than then did the fair tax. i can guarantee what taxes you will pay for the fair tax. what i can guarantee as is you will have control over those taxes. by taxing on what you consume rather than what you produce it brings your relationship as a

founder of the american government enterprise into a much more control. we have to discourage consumption perhaps but we are we are not going to discourage production which is what we need notches for folks at the top of the income spectrum but for folks at the bottom of the income spectrum as well. it will change the distributional tables but put the outcome of those and individual consumers hands. [inaudible] how will the fair tax do with that? >> is my least favorite part of the fair tax but it's called the pre-bay. i wanted to think about what patented the tax rating committee. i don't want to tax people on

diapers for their children or food they are buying. i hate to tax people on their prescription drugs and a calculator for school. the list goes on and on great if we let ourselves get into that cycle has so many states do of what is worthy to be taxed and what is not if you buy 12 donu donuts, if you do get tax because that's another doughnut but that's a wholesale purchase so you don't get that tax. so we created that predate which takes a look at the federal poverty line based on family size and nobody should have to pay taxes on the purchase of those essential goods defining the poverty line so we will just give folks a rebate. we will give it to them early of the taxes they would pay on all of those goods to the poverty level. because we do that for every

american they don't have to find out how much money you make. we don't have to track it down. the only relationship you will have as an individual american citizen with the federal government is as it pertains to taxes is filing your postcard that says this is my name and this is how many children i have an here are our social security numbers. that's it. the involvement of the american taxman and the american consumers life is over forever. you can only do that if you find a one-size-fits-all kind of a process to deal with exceptions exemptions and deductions. for us that's called the predate and it's based on that. >> any other questions? i will take that is take that is so wide a commission for endorsement. everyone in this room for the fair tax i will carry that proxy

back to the capital and see what we can do. you made my monday a little bit better by coming over and talking about good news. >> thank you very much. >> thanks once again to the congressman. we all now have our two panel guests and i will quickly introduce them and then handed over to them. our first will be the president of the national small business association which is the oldest small-business advocacy group in the united states. he became president in 1997. previously he joined the association in 1998 previously serving as vice president of government affairs. he has testified before congress

on numerous occasions appeared on a wide variety of television shows and most of the leading newspapers in the country. he is a native of new mexico and received his b.a. in economics from trinity university in canada. dr. karen a wallaby is the research director of americans for taxation. she has 20 years of experience in federal and state tax policy analysis. having worked for three florida governor's two democrats and one republican. she has also worked for the taxation budget reform commission of the florida legislature and worked in the private sector and is director of research for florida taxwatch. she has also served as an adjunct professor at florida state university. please join me in welcoming todd

and you can either stay there or, peer. >> thank you david. it's good to be here today. i appreciate being able to talk about the fair tax. it's a topic we have talked about little bit more because it clearly is the best form of taxation we believe notches for americans overall but specifically for small businesses we represent. we have been advocates of the tax for a number of years. i think we were one of the first groups to endorse the tax and because the small-business community faces every aspect of our taxes we have been so committed to it. if you stop and think about it if you own a business you are one of the few people in the country that faces to pay personal income taxes, business taxes, local taxes, payroll taxes.

i can list a whole bunch more by kiwassa to administer the tax on behalf of the federal government. you have to deal with sales taxes from the state and localities if you do that's a small businesses are the only ones to face the full brunt of everything our tax system has to offer. also like to point out that as much as our members hate paying taxes and think they pay too much in taxes the biggest burden of the tax system is they tell you it's actually the administration of the taxes. the complexity and the burden and the time weekend and we got to do with income taxes, government payroll taxes, estate taxes and the excise tax system that we have. when you think about it from the current system we have especially income tax but also the payroll tax that discourages entrepreneurs and entrepreneurship at virtually

every level. most every entrepreneur cr system as punishing entrepreneurship. every stage of business life is a significant tax optical. at the start of level of savings or tax and start a costs are not susceptible and when income is earned and the underlying assets income stream is told. their attacks on growing because the government takes an increasing share of income when more money is made in your tax when exporting because taxes are raised relative to foreign goods. the extraordinary high payroll taxes increase the higher -- cost of hiring. finally the owner gets to be the undertaker and the irs on the same day. the payroll tax burden is one of

the things that really attracts us to the fair tax. the payroll tax burden is one of the things that really attracts us to the fair tax. the payroll tax burden the small-business space, it adds greatly to the cost of employment. most workers while they see the fica tax the congressman alluded to in his talk on their paycheck they don't see the other half of that bill that employers have to pay. and that essentially works to depress their wages but also doesn't increase the wages the employers have to pay. the other thing that we have to think about from a small-business perspective is the payroll tax system is one of the primary sources of fines that they have to pay because they have to remit those payroll taxes on behalf of their employees under themselves.

any time there's a mistake or an error which happens and i do this every two weeks they wind up with a letter or a fine or a notice that they have to do with so it takes money out of the pockets of small businesses but also an enormous amount of time that they have to deal with. the other of course aspect of the whole system is the unnecessary complexity that we deal with in our system. small business community pays the lion's share of the overall compliance cost of our tax system which are in the hundreds of billions of dollars every year that are paid in order to just administer the tax system, to hire the cpas, to have work that is not getting done the business so to think about essentially removing those hundreds of billions of dollars is extremely attractive to the small-business community.

so we think to do with these problems the fair tax is clearly the best system. it has enormous simplicity and compliance. when you boil it all down the only question that businesses i should say are the only entities that have to deal with the fair tax on a compliance and administrative basis and the only question they would have at the end of the year, how much did you sell to consumers? calculate the tax, send a den and you are done. that's all there is to it. compared to all the layers that i just described for you here today. and for most of those companies that are administering that sales tax payer are administering a sales tax in their states so the type of administration wouldn't be fundamentally different from what they are are you having to do right now. one of the other main benefits is that visibility and understanding that congressman woodall describes.

the cost of the government would be right there in front of everyone to see on every purchase they make every day. and so i actually think that is one of the ways that actually would point out the ever-growing increasing cost of our entitlement system is that every time those costs went up, the sales tax for a million people would ultimately comply. economic growth of course. small companies would be unshackled from the system. it would be easier to start a company. it would be easier to grow company and there would be greater rewards for growing the company. that would inevitably lead to greater economic growth and in need, less of a need for higher tax rate. as the congressman said it would improve our international trade system and the other issues i would like to raise before it comes up people asked me as an advocate for small companies where you for the fair tax

because small businesses are the only people i have to deal with the tax system. especially her retailers. why is this good for retailers? i point out that every retailer, virtually every retailer i should say in the country right now has to do with the sales tax today but they also have to do with income taxes, payroll taxes on all the rest of the plethora of things i have already mentioned. we have the fair tax. all of that goes away from retailers. the only thing they have to deal with is that sales tax. so yes they may be more burdened by a demonstration of the tax code for the typical consumer but fastly less burdened than they are by the system we have today. for all those reasons and i would say many many more that i could get into if we had all the time in the world that we don't we have been strong advocates of the fair tax and hope the congressman has good efforts. good luck in his efforts to

convince his colleagues to get on board board. with that i will and then take your questions. >> aaron. >> well, hello. congressman woodall has done a good job of laying down the basics of the fair tax. what i am going to focus on is the economics of it and i'm going to do that with graphics rather than a lot of dough economics terminology. hopefully you will think that. so the first thing that we need to look at what the fair tax is what is the base of the fair tax? is a consumption tax, destination principle. it's neutral between savings and consumption. it's neutral among types of investment, neutral between capital and labor and i forgot

to do my slides. there we go. neutral between foreign produced in u.s. produced goods and it is broader, as a broader base than the current system and that is significant because broader basis, a broader base allows for lower rates. and lower rates allow for less distortion in the economic system and promote higher growth. all right congressman woodall was talking about the consumption-based and how it is a more stable base than the income tax base. so what this graph shows is a

comparison between agi adjusted gross income and pce is personal consumption expenditures. it is not exactly the same as the fair tax base because it has some things in it that the fair tax doesn't tax like the value, that value to you if your house if you collected rent on your own house. that is included in personal consumption expenditures and the fair tax also includes government consumption. anyway it's a good parallel and the adjusted gross income is the base of the income tax. you can see over time since 1975 i started with that because of the big recession in that time.

consumption, personal consumption expenditures have had a steady growth every year since then with the base always growing. an estimate for 2012 of the fair tax base the pce there is about $11 trillion and actual estimate the fair tax bases is 12 trillion. the next graph addresses the point about stability. a problem with the income tax is you have busts and booms. when you're coming out of recession at least it used to be that way. it's not that way at this time but normally you have a burst of

economic growth and in your income goes way up in a new habit the big growth in tax revenues and let's see if we can fund all those things with that. .. >>

>> that is another reason why consumption would be better as a tax base. how does that boost economic growth? the broader base allows for lower marginal rates and that results in greater work savings, investment and higher productivity with lower cost which results in an increase in jobs and wages. so it does approach though worker. with international trade deal with u.s. businesses and business activity the same.

it would give corporate headquarters to the west to keep them here. lately corporate headquarters leave because of the very high a corporate tax rate. but also because of the system with the taxes from the producing country are taken out. all in all it would result

in a territorial system through the u.s. produced goods. here is the table that summarizes how strongly the disadvantage with u.s. production is. for the goods sold in the u.s. market they pay both income and payroll taxes are in the cost of the goods sold in the u.s.. so they will have the burden. it gives them a definite price advantage estimated as much as 18%. we don't have the barter adjustable tax system when

you go to the fair tax board goods sold, american goods sold in a foreign country, they pay that country's the foreign vat is the equivalent it removes the disadvantage to the american producers. alright. now we have some examples of

research studies that estimates how much of their tax will affect economic growth. this first one here was done. the way economic models work is if they introduce change into the model that reflects the tax law change then day estimate the economic variables under those assumptions so you compare what would happen under the fair tax to what would happen under the base case which was is expected to happen under the existing system. and this study looked at the impact of the real gdp

investment and wages. so we have year friday and 10 absolutely every variable their. with the immediate effect from your was still going year five even by the tenth year. and what is especially important is the investment of how huge the increase of investment would be. removing the economic distortions of the tax system to not discriminate against investment. this is of similar study a little different model. with the economic growth in year one, five, 10, and i

have 2.0 that missing decimal with the gdp with the first column it should be 2%, 9% in the year five and 11% year number 10. it shows similar results with their immediate economic impact the first year and it goes well beyond 10 years. but i figured this would give you the idea. even consumption goes up with that fourth column people try to say it would fall because to tax consumption but it doesn't

because after payroll tax they have more money in their pockets with more ability to spend. the disposable personal income shows that they have to pay taxes on everything day by then the income is still higher than it would be under the existing system. this study measures the concept of the welfare gave over the long run basically you could think similar to increase of economic well-being and increase the purchasing power. and it shows for all three income groups, that the

welfare gain improved and the red bar is the low income and they have the greatest improvement. the initial it come as the second-best and the blue with the high income also improves but much less. so it is very progressive results. but getting under the topic of progressive but the current system harms the working for. with the benefit of the tax loopholes goes to the wealthy. that if you need a home mortgage deduction for people with the lower income levels can buy the home.

but that is baloney basically. the payroll tax is highly ingress that - - regressive but the payroll tax and the exemptions do not apply. you may not pay income tax on the first 10,000 or 20,000 depending on your family size but with a payroll tax you pay that on the first dollar, every dollar up and tell 117,000 i think it is. also a the higher rates of the income tax that reduces productivity that reduces wages. so in the and it impacts the worker.

there is very high marginal tax rates on the working for which hurts their mobility which is a disincentive with that certain level where the earned income-tax credit phases out so it does not pay them to work any harder or any more. than to talk about the payroll taxes across the various income groups showing those that have more payroll taxes and income taxes. but yet it is the secret of the tax system which is very regressive.

and all these tax expenditures that congress went through, the first on the mortgage interest you can see there, the blue bar bar, people making less than 50,000 may get 2 percent of the benefits of the tax deduction. 82 is more than that. charities do things for the port. i will not get into that the lot of charity to us to places that don't give money to the port with them have said charitable

contributions and 87% goes. and even if you take all of those tax expenditures in will make get 14 percent compared to the 61% for the well-off. people say you cannot get rid of the exemptions we need those they benefit the pour. they do not. the fare tax is progressive. this just the regressive label because it is a sales tax. but it is a broad based consumption tax that but then to go on spending that is based on family size and

different for every family. and that amount to a spending is cut free - - is free. so this shows the effect of the free bates -- prebate. i took a household to adults to child with a median income of 31,000 they would pay zero attacks under the fair tax. the median income is somewhere in the '50s or '60s would only pay about 10 or 11%.

so the fair tax rate of 23 is the same for everybody because of the prebate the actual tax rate is much lower. this is a steady about distribution looking at the effective tax burden over the family's life time. this is a very clever tax and the doctor will be speaking here in december. and gave them that earning history that in the real world it goes up and down. and expenses are higher with kids and college but he created a spending history

and the income history and figured out what the income taxes would be and then he figured out what the fair tax would be. and without getting into detail the current system is the red bar. for every income group in his simulation the current system the effective tax spurted is higher than it is under the fair tax, the green bar. but they do need 2.0 this is of very good approach. looking at the distribution of the tax burden because it takes taxes dash security benefits received you paid them and you get something back.

so that is very good to show the true burden of the tax system. with charitable giving for charitable deductions will go away at want to make the point economic growth drives productions and to stave this side of gdp the best thing that can happen for charitable deductions is for the economy to grow. i will skip the housing because that is a complicated to explain in a short amount of time. but i will wrap up with why i think that it promotes economic growth that results in higher wages.

to put its u.s. workers and business on an equal footing. so everybody pays the tax even though we said the board do not that is because it is a rebate to the winnebago to the store they pay but then the government picks up the tab. so they see the cost of government. thank you. >> thank you very much care in. we have a few minutes left for any questions of the two panels? >> i have a question that came across. it says if i am understand you correctly subsequent -- sells a security payloads of

is based on what is paid in than what about the fair tax? but then for that payroll tax to remain in place than the rest keys of the wages precisely the same as that where just as they do today the benefits would be precisely the same. in terms of the basic benefit structure with the sources of revenue with the sales tax revenue rather than the payroll tax revenue

>> all rights. thank you very much for coming. and we will conclude this event. the next two and a half along with the three panelists we will meet december 3rd at 11:00 a.m.. and to and then they will see how we can improve the tax policy process. with that distribution analysis and tax expenditures with the congressional budget act. thanks again. have a good day. [inaudible conversations] senator[applause]

>> come to order. apologized for the late star. we had votes on the floor and members are late coming back so i appreciate the patience of governesses. in the 21st century we know refrigerator's keep food cold and preserve fonder but restaurants and sells phones and television and electronics require electrical power. but then to lead more productive lives in the modern world even in the ebola crisis what.

>> said they don't lose there potency but it is absolutely unnecessary but the great irony has more than enough energy to use the modern technologies they you do? a price with 30 percent of oil and gas discoveries over the past five years are in sub-saharan africa. said hachette -- 219 has access to the electricity is still a major source of fuel. hydropower is 20% of total power supply the less than 10% has been utilized.

to examine the perspective of the government programs have electrified africa as well as national energy projects in rethink the witnesses that we will attack. but to make that dream is increasing it a reality. and to introduce h far 28 is if it passed the house in may then it was then. in the senate. but then to announce and is 7.$1 billion you have no

desire to build the capacity of the african powered. >> is that i run a? that this could one country, south africa admits and that produces a last name. 2% in the united states spec we were green even when schools in -- they are safely brought home it is

the pollution that contributes to sickness and death. that current situation in canada act and there represents him and according to reports should have stayed with the iea to see rapid growth but 25 percent. that is a good trend. also to speak to the rise but that to be true is matched by the growing demand for power. transforming all forms of commerce must be charged to

cut and it does not have to be there lot but during the colonial period they limited in the industrialization and now it is a long test. maybe for a reason with the positive industrialization even when financing is available the world population from the power grid has a high costs for energy and other factors. they can and must be overcome to required international collaboration

collaboration, a public-private partnerships in the role of government and their citizens. we will mine get to the point where it is necessary overnight but we will get there if we take serious measures now. with regular electricity we also use computers to enhance their steady. and to just touch further and of course, our chief of staff for the subcommittee if not for the generator they could not keep a supply is cold as they must remain so especially when starting madison's. the two panels achieved electrical power and private projects. the future of energy in

africa is brighter than in the past but we need to seize the day. so now any comments you may have. >> thank you mr. chairman for your leadership with the prospect of energy in africa and it is now brighter. so thank you to make 19 member banks and things though witnesses for being here today. if it is a fuzzy image constraints economic growth undermined human resource development and quality of life progress and limits social services so economic prosperity she is the only one that is compromised bet

can only look at the power africa and i am looking forward to the testimony. and now i defer to the ranking member. [laughter] >> is there any opening comments you may have? >> on several accounts as a republican unfortunately i contracted in and when a visitor in my body and had to go to the hospital then i found out the need for refrigeration and antibiotics. i started my journey into a ship antibiotics and other medicines to africa was mailed personal experience after having an and with the importance of energy and

ironically here is a country that produces quite a bit of oil but they did not have enough at that time somebody donated the street lights but they did not have enough energy to generate electricity as we drive down the street and then to see the little coca-cola bottles full of kerosene and gasoline and then it is poor and restrictive. it is mind-boggling. and then for the ability to harvest will for their own needs. and then with what it needs

with a confusing about comes so you don't have the ability to refine and it is unfortunate. put on the other hand, the lack of knowledge to make sure a benefits their own people but it is sad to see that difference of great wealth and poverty. the french donated these lights so when you drive down the road then powered by the sun but this time before the only lights in existence you could see all the people walking in the

streets but it was just from the car lights but that is why we need to facilitate to take the energy so with that i will yield back the balance of my time. >> i will yield to the distinguished ranking member. >> thank you very much mr. chairman as always for your leadership to call this hearing. you and i have worked for a long time on this issue on the most important needs on the continent is building that infrastructure. i would like to thank our distinguished witnesses with usaid and then looking to

see your perspectives with that economic national security and human development aspects related to the energy sector. launching power africa last year the first iteration provides more than 10,000 megawatts of electricity to increase access to 20 million more households and businesses. with the african leader subject it is essential point of discussion. it is the further commitment of $300 million to the power african initiative with the newt equipment of the pledge of 2,000 megawatts of the

30,000 megawatts and then reaches 60 million households and businesses. based on the early successes we continue to invest in the initiatives to the african continent that is when i was proud touche join both chairman as well was the ranking member to introduce the electrified africa act. we're hopeful that will move forward in the senate. so i am interested lot more congress can do to help. >> right now our distinguished experts have made major contributions in the past and present and can speak on this subject. they key for being here. and having previously served as principal deputy

secretary and then focusing and other foreign policy issues. >> so now i of the staff of the security council and other positions working for the vice president at u.s. department of energy and council on environmental quality. we will hear from eric as the assistant administrator but then the to serve as the assistant and then after the private experience working in africa is that a family

in been and then to work for citibank tokyo. then robert but he irresponsibility -- responsible for energy systems and then with the market forces but the electricity market. spec could dry quarter has a long but then said its u.s. 87 thank you for being here today. >> good morning or good

afternoon. chairman smith and ranking member of the subcommittee i am pleased to be here to testify on behalf of the u.s. department of energy on the future of energy in africa. the department said the energy office of international affairs focuses on the world's most pressing goal energy challenges from security to foster international collaboration with science and technology to address market if facilities to make a climate change. to leverage the technical expertise of the national laboratories of technologies and markets and policies in that context i am pleased of the interest of the subcommittee of energy development as propose to sketch in major contours' in the markets with their activities.

sub-saharan afric as the chairman noted is experiencing rapid economic development. the second fastest-growing each region. the world bank reports economic growth rates continue to rise at 4.7% growth in 2013 and 5.2% during victory year. many african nations are positioned to become increasingly important both as energy consumers and producers. the international agency so that it would quadruple in size growing by 80 percent between now and 2040. even with robust economic development subsidies they will struggle to meet the needs a mistake cannot find

effective of investment to spur sustained energy development civic and hedges 50 million into if i can to be a player in global oil market, up oil production has doubled since 1990 and now accounts for the sub-saharan center for almost 30 percent on the we are expecting it to grow at wheat million barrels now we're hoping 20 million by

2020. re and out with the economic growth for oil products but on the natural gas friend to come a major discovery shows the excitement of the global markets and will be provided fuel for africa's growing economies. among the countries of the most important developments are mozambique, tanzania and madagascar are were there have been major progress steps made for commercial development for newly discovered resources in recent years. and the power sector unfortunately are among the lowest in the world as noted. north africa by contrast as electrification rates of over 99 percent from sub-saharan africa the rates are averaging only 32 percent meaning more than

six centric 20 million people lack access to the services. and as the chairman noted this translates into a concrete impact on people's livelihoods. with this context when president obama underscore the u.s. commitment to africa energy development development, he also asked for a engagement by the department of energy. so in june of this year's secretary convened u.s. africa ministerial that grew together with 500 participants, 42 african countries, all relevant pieces of the u.s. government and 20 ministers across it and we focused on

power generation and roll electrification and regional power pools of oil and gas development policy and regulatory issues and investment opportunities and the requirements for finance. in the wake of the african and ministerial the department of energy and works with the leading economies to be the energy development goals and alibi to give a couple of quick examples. in the renewable energy arena national laboratories working with angola's ministry of energy and water to train the trader program to help make available more instructors and technicians to install systems in angola.

but this will bring together information on and the natural gas arena in addition to working with the detriment government officials and students the acting. >> bedded early 2015 they can gauge on the policy environment taking shape in some of the critical frontier countries. the affirmative and -- entrance.

>> it is absolutely essential that in a budget for our partners in africa and also our country. >> it is the course -- cornerstone i remember recognizing that economic growth is linked to the availability of energy and services to meet the needs of african companies and citizens. that is why we're working with private and public

sector partners in the united states and across africa to help run the show the full energy potential for the benefit of african citizens and to the benefit of united states. thank you for the opportunities. >> thank-you chairman and the ranking member and members of the subcommittee thank you for the opportunity to defeat -- appear before you today. the power african initiative including congress and wearing be tried but is not a kid time and in an but they will not sit next -- sickness -- with the investment they said -- and

to tell them the agencies he is working to address the obstacle where more than 80 private sector partners are committed to invest over $20 million to generate more than 3,000 megawatts of energy providing power for the 5 million. for example, to support the nigerian government to privatize to end its distribution companies. these companies in addition to the privatisation is expected to produce 8,000 additional megawatts of power in the coming years. at the same time another member of the power africa team the private investment corporation has committed

$410 million in financing and insurance to private sector partners projects. for example, with 250 million financing wins in northern kenya we hear that confidence the biggest project when complete. power african countries have committed to undertake policy reforms in their energy sectors. the challenge is a compact to invest up to 400,000 -- $498 million. this includes tough policy reforms needed to have a viable sustainable energy sector to stimulate private investment. power africa has been able to have commitments in excess of $4 billion for the development of the energy sector. power africa success

extended to u.s. companies as well. for example, general electric is one of the countries making commitments in that situation i described. as another example during mediate -- meetings that was posted by u.s. trade and development agency, these discussions enable a country based in washington to sell $400,000 to the nigerian distribution utilities now they are discussing another order that is $6 million. and they are expected to wage even more sales. power africa is facilitating investment and are so crucial to reach.

>> rabil to you after we are off create and produce innovative solutions for off grade energy. >> and other outside impact and then it's even though washing machines used to clean up hospital scrub. some of the basic building blocks that we need to keep the epidemic that it soars. at the african leaders summit president obama renewed our commitment to the initiative and pledged to seek a new level to

extend the reach of power in pursuit of a new aggregate goal of the additional capacity thereby increasing access if we hit the goal by 60 million households and businesses. also there are major new commitments to power africa. 600 million don't have access to electricity but together with our partners in congress and africa or the donor nations and private businesses power africa is working to greatly increase access for cleaner energy. thank-you for your support and your leadership of this very important initiative pilot for word to your questions today. >> thanks for your leadership. now i will yield.

>> thank-you chairman smith and a subcommittee members i appreciate this opportunity to discuss south africa's energy future hall used for policy tools to support economic development in africana and to lay the groundwork for it is stable and prosperous. here at the state department we focus on energy equities around the world to see to elevate and integrate into broader foreign policy. first-ever like to a knowledge to the house to pay attention as demonstrated to the passage of the electrified africa act. clearly is going through a historic time and is working hard for those renewable

energy resources there will encourage private investment and economic growth. with the inner agency team and we have a very strong team one of the strongest of my 40 years anti-government. it is focused on three main areas to promote good governance as it relates to managing oil and gas resources. second increasing access raise electricity and technologies. governance and transparency your key security with economic concerns the energy governance to pass that

initiative on the ground on some of the most difficult issues for instance management of revenues and incorporation of best practices and keep them from an impasse. and to be currently engaged sierra leone, somalia and antonia the offshore gas discoveries that reach national significance to look at ways to ensure their sound development. transparency is a key component to be actively involved in the initiative to support transparency and

natural resources. the representative civil society that we work together to this clews liberation of the revenues to see how much they are worth. they're 18 countries that are compliant and their candidate countries. we have heard about the statistics on the extent of energy poverty in africa and natalie working through power act for cabot will tell lateral efforts to the united nations and though world bank. with an investment needed to expand that was a key sector. to participate with the

framework and the reforms necessary for the environment to reduce the risk for investors through consistent diplomatic engagement through embassies the state department is working to ensure these transactions that have been the emphasis changes and even more investment there working with the embassies to enhance the diplomatic efforts while minimizing cost with trading sessions to upgrade the skills of the economic officers in the region. we're very excited beyond the grade initiative and we were working globally to promise models to help provide energy access to world populations.

and then between power africa and sustainable energy with a goal of universal access for the 1.2 billion people around the world for those that 29 have access. a goal that they will with with the objections with european union makes large. >> data no fed is someone's but then those larger markets will attract investment and we have the and persian that works with countries but then just on

campuses of africa but inclusion mr. chairman it stands at a crossroad. . .