superman dawn of justice, let us hope that she is not the secretary. thanks very much. [applause] [inaudible conversations]

[inaudible conversations] >> how are you? are you doing pretty good? >> doing pretty good. visitors discount. you get the neighbor discount. >> the neighbor discount.

>> how are you doing? >> absolutely. chuck todd. let's see what chuck has to say. he's so sad. >> they tried to find the saddest photo. some of these are christmas presents.

>> i hope you didn't close guantánamo. >> exactly. >> of fireside chat. >> any other suggestions? [inaudible conversations] ..

>> >> when arthur asked me to introduce them i called him and said what should i say? this is exactly what he told me to say. i am short. fax. old. grossi. and go to bed 8:00 p.m. [laughter] that has nothing to do with his intellectual capacity or energy. i suspect he says -- is a marked trees stand anybody here. the "wall street journal" listed him in a feature article of a gallery of the greatest people to influence our daily business.

"time" magazine wrote then century's greatest mind. the "l.a. times" a dozen who shape they days and the most destructive ideas and the last 85 years. anything that has to do with disruption should have arthur lives listed that put -- will pose a question of this is arthur laffer with a bare living grow. [laughter] they both achieved celebrity status because of their curves. [laughter] file not ask for hands which

curves you suspect. arthur laffer. [applause] >> i had the pleasure to introduce to all not long ago when he got an award from the manhattan institute so it was a pleasure to reverse. you were even funnier than i was. just a little bit. does anyone find this rather unusual? i am from cleveland ohio i don't know if you saw that leakey fact but it buffalo 75 inches of snow. i remember a long ago would be remembered jack kemp? [applause] i called him he was in buffalo and i ask him what is the weather like?

he said it is clear and still. this though is clear up to your ass and still coming down. [laughter] day you mind if i have a little fun today? is that okay? it is of fun topic especially after the election november 4th. [applause] [laughter] especially i will say that the we are four times just to make sure especially the election of november 4th. it is not only the senate and the house but did any of you see the governor's? my goodness. all seven tax-cutting republicans won reelection.

but then did you look at the increase of governors? three out of six lost their seats. we took the governorship of massachusetts that is amazing. look at maryland rejected governorship there illinois we took that. [applause] economics really does matter. we did not take california although jerry brown did lose supermajorities of both the assembly and the senate. we did not take minnesota he was reelected but we did take the house. in new hampshire we to backhouse. it is amazing what is going on if you look at the state's representatives we picked up a huge number as well. what i thought i would do is

go to the economics of states is that is okay. what we tried to do in the book was to put economics on the state level. i hope and i am not going over all of your heads today if you have two locations if you raise taxes year and lower over here producers and manufacturers will move from over here to hear. is a way over your head on this one? i had more fun doing this with steve and rick and travis but i will go through california with zero. i with their most of my life and finally i was on the governor's council. when he turned '02 the dark side covers schwarzenegger i

decided to get out of dodge. i still miss it he is irritating to be around. i remember the first time that with him having breakfast with him and his house and i met him a couple of times but i did not know him well. i had breakfast and i heard his sharp wit was amazing sight figured the best defense was the aggressive offense so i went up and said governor, i just want to tell you very clearly i am pleased to be with you today and it is on earth -- honor but the truth is i hope your a good governor and do well and with that he responded. why are you so short?

i said where did that come from? milton friedman if you remind me of danny devito. you know, i was with him in the movie twins. so i never went like that again. so the book. the first chapter starts with a fall from grace. , there are 11 states that have introduced the income-tax. so what we thought is we would take a look at what happened to those 11 states. is started of west virginia in 1961 ended connecticut's it in 1991. if you look at them you have names, rhode island island, connecticut, a new jersey, west virginia

virginia, pennsylvania, ohio virginia, pennsylvania, ohio , michigan, indiana virginia, pennsylvania, ohio, mi s, nebraska. ramose states. but we took those days before they introduced the income-tax and look at the metrics, population, labor force relative to the rest of the nation. then looked at the sabermetrics including state and local taxes. if you look at each of those 11 states with not one exception every single one declined as a sheriff the u.s. economy. not one exception. in some was a lot.

that is a collapse but deal to reduce the income tax? mitt romney. i head to mention that for the crowd took a look at ohio. i was bored and raised in ohio. and then the gatt though lake view cemetery. have you seen cleveland? it is a bomb shelter. it is a disaster. i to go to new jersey. 1965 in added income tax or a sales tax the fastest-growing state everybody moving into new jersey had a balanced

budget. when i was governor with john karzai by the way of full disclosure. [laughter] after reading all that stuff on imf global but the highest property taxes with a huge budget deficit. you could go on and on. west rigid the? you cannot make a stapler. yes you can. just joking. if you look at public service if we were sitting in the capital in the debate what would that be like? that was against the income tax would say it would hurt growth in favor of the

income-tax they would argue schools, highways, roads but i decided to look at public service. all the different services at the state and local level we have detailed records. look at full-time employees you can see what happened. sympathies you can measure the al put the department of education for example, in cliche and math. look at these 11 states only three of of had improvements of public service. just little bits.

eight declined in public service relative to the rest of the nation and six declined by a lot. that is chapter one of the fall from grace. then i did the nine members to offset those then elected that comparison with the nine states of the highest income-tax and if you look at those it is incredible. the nine states with no word income-tax. in every single category including tax revenue. it is amazing. if you take out the oil states and even without those the nine states did

way better than those others and the corporate rates rates, there is a huge amount of data over the last 75 years. so it goes back 50 years. there is not one single year in the last 40 that the zero income-tax rate state did not perform with this a number of states. it is just incredible with that evidence. then look at piling on have any of you seen the data on right to work? if you look at the difference of those with and without it is incredible

their way out to perform the forced union states it is amazing. looked at minimum-wage the same results apply. then the next chapter i dare you to read. but what i did is the bibliography of 55 articles on academic journals with save results across the board. we have irs data 1982 on. the reported year 93 if you look at where people are moving and where they're moving to and their income levels we used one of these variables that is on the estate tax or the death tax.

tennessee has the estate tax and what they did was the number of states of tax filings and then the size of the state's florida has twice as many filings per 100,000 and they are twice as large. people really do move. i was reminded to eddie b. remember howard? he was mr. death tax himself. he wasn't under 12 years old when he died. six months before he died he decided to move to florida. [laughter] it is funny but his behavior was perfect his words were bad. he did the right thing the

judge should not have been arguing in favor of the estate tax all the years before that. then the last chapter i go through the arguments and discuss them the right to find a fine but i want to go through texas and california. the two giants of the plan that. texas and california. if you look with all the taxes on income i think california there was 5000 separate taxes before i stopped. there was more to go. if you look at all the tax rates and you will just have to believe me, tax rates are higher than and texas that

not only higher but the effective marginal tax rate on a unit of in, is 65% higher than the effective marginal tax rate in texas. you have to believe me there is the income-tax in texas. no capital gains taxes but did he take all those together on economic activity is 65% higher than california. wants to look at this higher marginal tax rate you know, there'll be some leakages. in the late 40's or early 50s then david measure the horsepower of the cars. as you know, it is not effective measure he is

wanted on there we are axle. between the engine and the we are axle is paris six leakage. so i will take that concept if you look at tax rates if you go from tax rates to tax revenue you have parises it leakages. so the unemployment rate was much higher. peppers dissipation great but if you though dash rich people moving out of california and into a texas look bad tax returns people hire lawyers or accountants

sold the incoming is sheltered. you can see what is going on. if you go from tax rates at 65% higher the first leased shoe tax revenue been 25% higher than they are in texas as a share of gdp. then the next parasitic leakage this is all state and local government. the next is between revenue and actual state spending on public services. because of the of regulations if we decide we need to build more homes we would look for a huge piece of property that you have to

go through the permit process that is over two years than once you start that it takes a number of years to develop but texas it is very different with a prevailing wage you do have a california and school teachers are all a nice but not in texas. in fact, from 1975 through the present schoolteachers in california have put 170 statewide strikes but in texas if you strike you really lose your license to teach. there are none. it is amazing. if you go from to spending you have parasitic the kid never to a higher marginal tax rate 25% higher revenues

then they are dead even. then you go to the third process if you go from state spending to the actual provision of services. from california and texas. it has left poverty as said share the population which has 23 and 1/2 percent. california has the highest poverty rate of any state in the nation a date of appointment but here you go. california pays their educators 40 percent more

for full-time equivalent employees they and texas. remembers spending is this a bit each state. public welfare employs may may 56,000 to texas it is 37,000. california pays hospital plays 53% more than texas. california plays police 70 percent more than texas. california pays highway employees 76% more than texas. california pays fire protection employees 86% more than texas. california pays corrections employees 93% more than texas. california pays state legislators $95,000 per year. full disclosure they cut their pay down from 130,000

due to the weak economy. texas pays $7,200 per year. [laughter] on the provision of public service i have to go through this with you. the annual cost of a prisoner in texas $21,390 or $58.60 per day. in california's the equivalent is 47,400 to $21 per year or $129 per day. california builds 1 mile of state highway at today's $65,000 but 1 mile in texas the average cost is 80,000. texas employees 345 employees for every 10,000

of population but california employees to 031 people for every 10,000. of the u.s. average is 286 as measured they are the fourth worst in the nation it is true the best performance the last 25 years. usually california is the second lowest been beaten by mississippi or the breezy and a once by the mexico but california texas's 25 highest. of the five mega states is the lowest texas employs more police protection than

does california. texas has far more prisoners. per ledger doesn't buy the 23 over california. for all sorts of criminal activities but texas has more but they do i don't know. but california prisons currently run 75% over design capacity. that means it is designed to

have 100 people in california is 175. texas has 15% below design capacity. and has more highway employees. texas ranks 23rd in the nation was state road conditions where california is at last -- dead last. soulful disclosure one piece of evidence way outperforms

california has 70% more than texas and they pay them a 52% more. so the one thing that pops out and i was debating with intelligence squared and he said i can see all your crap but frankly i could give a i care about the quality of life. i care of things happen so i am willing to pay in less but the truth of the matter is the quality of life is aligned with the growth with

prosperity. those live the rage of policies their performances also is relative to the rest of these and with that i will go open for questions. [applause] please wait for the microphone. >> that was great. thank you. in this respect many of chippers still singing the praises of california or are

they in denial or do they enjoy sharing a lot not open to others? >> a lot of them are wealthy or entrepreneurs. california is wonderful. i'd love and i told people when i left i had a problem to go back with the auditors i had to put water color pictures on though walls. i byplay beach boys music in the background. california is spectacular. but once that three years dash of limitation now i can go back and enjoy without taxes but they do have a great life. from my standpoint i could've stayed in a california.

but there is a lot else in life besides economics but the reason i focus on state and local economics that is the keyboard to play they cannot change the sunshine of the mountains are the beaches the you can allow fracking. california does not texas does california has far more reserves but texas produces wealth. but when you look at this another of wonderful thing is tax shelters do well in california. palms are a tax shelter if you watch the price of houses it is like the cleveland clinic and cleveland state university in downtown cleveland. then all of a sudden you see the beautiful buildings

there is some education. believe me. they're 501(c) three. tax-exempt activities do well in a high tax environment and a day california the one tax-exempt activity is loading a whole because issue get the unrealized capital gains. so look at the migration patterns. california was a larger share of the u.s. 10 years ago the and it is today and the decline is happening faster and faster. when we did proposition 13 been got rid of the income-tax and the spending limits, you cannot believe the growth 78 through 90 then prop. 98 all the taxes

came and the growth just stopped. in california we were adding one said francisco per year in the states in the 12 year period. was incredible and it just popped and it stayed that way. >> can you comment on any york as the future especially with the new state tax? >> what was yesterday? >> i had been editorial not the the york times. [laughter] i sent in the paper there is no response. but the clear sign is they have startup new york.

the program into the right categories you get tax-free that is a clear sign the industry attacks is matter. lecter migration of personal income yorkists at the bottom. i go through all of the numbers i remember my dear friend when your taxes are even higher than they are now. and he wrote the pour a little rich man. then finally decides to buy a tax-exempt bond. but that is exactly what is happening. it is very sad. this is the symbol of american society today there is no place that represents capitalism than new york city.

we have plenty of room for all of you in tennessee. [laughter] it is fun. i paid for my house with a first-year tax savings. >> are there any data about those that have done the reverse of the fall from grace? >> one city has done that now a number of states have cut under carry when you had governor carey he was pretty good but one was in income-tax state to the zero attacks date that was alaska and it did with the discovery of the whale. day coveted the income-tax

and alaska help split -- al platt is related to hydrocarbons save with north dakota. four or five states have large extraction industries at a tiny population so they dominate the numbers if you let them stay. but the hydrocarbons especially well and alaska is the only one. there are those that try to move forward. in day 1981 river getting rid of the income-tax to estimations the numbers came in. we tried to do it but doing a great job with five years

into this program but it missed all the booms of '80s just in the last three years if he was indicted federally convicted and sent to prison. that put a crimp in our proposals calling for word that i got a call yesterday from jon kyl said new governor who said that see if we can be the first date to get rid of the income-tax. budget states have done tax cuts if you use the time series cross-section it is not misleading but with that cross section analysis it is solid. every single state every

single year just look at those numbers. >> if i could ask you to switch to the federal level and if you were given us a choice of three federal taxes to reduce what are the top three? reg the progressive income-tax is the worst ever. major tax. of the estate tax is disgusting beyond belief. you earn your money after taxes you can take that and go to vegas or drinking for spoke it the federal government says god bless you but if you decide you want to give it to your kids we will tax you have 45 percent. i know of no taxes the a progressive income-tax as well. it is the antithesis.

if i can, i don't mean to pick on him he is a good friend of yours the french guy from nebraska. what is his name? buffet? warren buffett. [laughter] does any of you remember the letter he sent to "the new york times"? i payless fit my secretary. i have 21 people on my staff and i pay less than all of them then he made the fundamental mistake say what his percentage was i pay 17.4% so that is biased against the employees against him.

now you will think this is a lot of money but is less than $8 million you take it is a lot there really isn't 17 .4% slide not a math whiz bell hold on. i took the number / 0.174 and i got his adjusted gross income. a little less than $40 million this a lot of money in 2010. that is amazing. so let me go back to the university of chicago to see a person's income. i may shock you but according to henry simon

what he spent, what you give away, and the increase of wealth think that over. would you spend a share in, you give away is to become the and the increase of your wealth those three comprise your into gum. follow the? i saw warren buffett's letter that i went to "forbes" 500. i looked at his net worth. that is easy to do with his company berkshire hathaway. so forces probably not too far off that the beginning of 2010 the net worth was 40 billion at the end of the year it was 50 billion. he added increase of net worth of only $10 billion.

i then went to the bill and melinda f. gates foundation website provided even have a computer but i have people and that year he gave 1.7 $5 billion they publish the conditions and this bill and melinda are not there is taken away and death the federal government changes the tax revenue is taken away. i did not go to his sons or daughters website to is have foundations that they give to i also did not go to the discounted insurance premiums and i didn't go to the difference where you buy and sell companies under the shell you don't have to pay

capital gains if you actually own the company i didn't do any of that. his id come in 2010 may be 13 billion for what i looked at. followed the? i went to his taxes less than 8 million and calculated the percentage was 6100 of 1%. now what you think he recommended to obama? taxing capital gains? you think he recommended maybe it should be the first billion? of course, not. he recommended on raising rates when he does not pay taxes on.

this is where you have to be serious we must tax all income at a single rate and stock. [applause] and we have to do would on everything. there should never be the 501c(3) every again in history. >> so forget all of these. i did the jerry brown's flat tax you don't think it works are people like it. in 1982 i did it we got rid of all federal taxes for all of them. the corporate tax. over the capital

gains, estate taxes, excise taxes, medicare and medicaid taxes, tariffs. without the syntax was the only exception i guess we don't like trump guys smoking and shooting each other but if you get rid of those static revenue neutral for the employment you could replace all federal taxes today with the flat rate taxes on business net sales with static revenue neutral.

can you imagine if we had a flat federal income tax of 12% and that's it? he would not even have to file a tax return. if you know, someone's lawn for $10 you have to write him a check. that is where we should go. that is literally though way >>. >> in addition to the legislative taxes with shadow taxation of college financial aid programs with the insurance subsidies have

you studied the effects of the shadow tax system. >> the one that i love is obamacare. whenever someone gives away resources i hope it'll go over your head. [laughter] but we have to go back to milton friedman. because when imus him terribly right followed him i could raise the microphone. fled to its very does not work at the u.s. treasury any longer. whenever the government spends is taxation.

they spend money they have to take it from someone else to go through the ways that they distort the market place and they all have very powerful effects but it has gotten so arcane you cannot even tell what is going on. it is hard to figure out that degree of intervention. the diems city bus tickets. >> with your wrote -- longstanding analysis relative to public policy what are the political implications of the messages sent with that 95 percent

that was accurately predicted? for the tax policy? >> said the distain be my age as 74 is you have experienced things in life. have been to this barbeque before. the first time was the late seventies or early 80s. is milled through the good but i did not know what it was. now why do i think literally it is 1978 again the election results are in and solid. i think the corridor has been entered to. when i looked at 2016 i.c.h. you'll have a supply-side president that does not have to be republican or a democrat or conservative or left or right it is economics. that is all about incentives

level we have had is a redistribution society and whenever you redistribute income, you always reduce it, but when you take from someone who has more and give to someone who has less. they have less though the incentives to produce are less. by giving someone who has less they have the alternative source of income of the there working so they will produce less. whenever you redistribute income the more you reduce income until you get to the extreme if you have 100 percent redistribution it did zero al platt. if we had vowed to%

redistribution retracts everyone who makes above the average income 100 percent of the excess. everyone who makes blow would be subsidized up to that amount. that is what edger percent agreed distribution model. if we did that and taxed wouldn't% of the excess and subsidize everyone below everyone will be equal at zero. region should be shadowy reduces output. i dunno if you remember in said johnson and nixon and ford and carter i refer to them as the four stooges. though largest a semblance of vicarates ever put on planet earth. favor of the first order that led to be still my heart.

w was not my favorite. i hate to break it to budge big spender and awful president and obama clearly. but you are in store for a big change. i used to tell the president is my professional judgment as an economist and professor that you truly are a certifiable a genius. [laughter] but some of my colleagues at university don't concur with my assessment of your intellectual acumen. some don't think you're very bright at all. but what we do agree upon is the one unique characteristic of your and kidney ability to select

your for predecessors. anyone following them. [laughter] and it is true. if reagan had been elected then he would be a different president. he really would have. in all honesty it took carter to create ronald reagan and that is interest. in the same breath you can imagine that great president who will follow barack obama. [laughter] [applause] [inaudible conversations]

>> great this of any dimension of a human enterprise is rare. keyhole lanius the term great 15 times a day. a great tennis player, have a great day, and a great movie but we don't understand what it is. we emptied that the ocean of content and have transferred our appreciation for greatness from a political class because we have not seen it to our athletes, entertainers, and

actors. here we appreciate greatness. there we can easily have relationships. we buy tickets, they are expensive. they're arrears the disappoint. visit our political class whoever that we cannot appreciate greatness because in many respects it is gone because it is driven by the three factors that space with the sun and the mood and the stars and a astrological formation. and not just garden variety but character. you need character. they're rights individual and the right to kent does this person know what they're doing?

can they make washington work? those three crisis and character and capacity makes the greatest presidents great. washington and lincoln and fdr. maybe five including one of the favorites down here in jefferson, jackson, teddy roosevelt, wilson arguably a work at the wilson center for scholars. [laughter] zero with a memorial the only ph.d. president lee one buried in washington d.c.. treatment clearly. three undeniable the five close but no cigar presidents and three others. i choose to identify kennedy , johnson and ronald reagan to exhibit tracing is of great is real or perceived but that is 11 out

of 43 different presidents. and 11 that had been truly consequential. we don't want another great president because the founders created the political system to disaggregate power. so they created a system of the energetic executive but one that is accountable the only thing that liberates president's and the political system is a nation encumbering crisis. not even the cuban missile crisis.

but it turned quite the other way. and that had to participate the 38 greatest presidents confronted the three greatest that the nations faced to have the character and capacity to go along with it. i don't want to risk to test the proposition that they will leverage to do with a crisis. so stop expected the presidents to be a cross between harrison ford and air force one and a superman. [laughter] so you can allow them to be good.

. .

medical merchandising and make it incredibly exciting. i'm curious to know, your previous books were about baseball and al capone. what made you choose this subject? >> guest: well it's funny because i really had not had it on my radar at all. it must have been 10 or 12 years ago i heard a rabbi give a sermon about the importance of thinking of yourself as a partner with god and be able to change the world, not just to improve yourself and be kinder around -- to people around you but how we can transform our existence. he said as an example the birth control pill. think about how the birth-control pill must have set out to create one of those important inventions of all ti time. it completely fundamentally change the human dynamic as reproduction be