a few years, five to ten years perhaps. gdp is $2 trillion higher. private business equipment and structures are up by 39 p kt. the 39%. we have about 3 million additional jobs. now this would cost money initially on a static basis of about $40 billion4 0$400 billion a year. by the time you got your growth it's under $40 billion a year. i think you could trim a little spending by that amount. it's not too much to ask. in addition, there would be some attempt by people to report more income in the united states, and less income abroad if you have multinational cooperation, and the joint tax committee seems to be guesstimating things on the order of $20 billion or so a year. they don't quite explicitly state what they're doing. so you get a virtual balance after the growth effect from all

of these tax changes. so no net cost to the government over time. and you have people's income up about 10% and additional jobs so more people are working. now that is close to a free lunch as you can get. and that's the damage done by the current tax system. all the neutral tax systems are a means of getting the three layers of tax. some are collected at business level. some collected only at retail. now my favorite, the personal expenditure tax is put down your income subtract your savings pay tax and what's left? that way each year you sit down and fill out a form and you say, "they took what?" and then you don't vote for them again. where laz the retail sales tax might be nickelled and dimed and you may not save all your sales receipts and realize what has happened to you. but there are conveniences of doing it one way or the other. we have to take a look at those. these are all efforts to get

away from the horrible horrible effects of the income tax and moving to a more sensible neutral tax base. that's where the flat tax is really the flat part. you can have one rate. you can have two rates. but the base is flat. we're not putting one layer on consumption and other the others. and i'll take any of them that can get me there. although i have my preferences. but that's really the focus we need to have. thank you. >> good morning. i want to thank david for putting this together. if you haven't already realized from the first few speakers this morning, our current income tax system sucks. best takeaway message. it's an economic term, yeah. it's called sucks. the united states tax code severely distorts market decisions and the allocation of resources. it impedes economic growth and

potential tax revenue. you're hearing a lot now as we're getting into the presidential election cycle and there's a lot of agreement on the need for tax reform but there's no consensus between or within parties among the the specific elements of reform. even among republican parties there's differences on where you should focus. but luckily policymakers need not fly blind when looking at what is a good, efficient fair tax system. we've been talking about that this morning. keep in mind a few things as you walk through various ideas. one, a tax reform should be simple. we've been talking about this all morning. the complexity makes it difficult and costly to comply with. it also makes it easy to scam. congress should make it simple and fair as possible to reduce compliance cost. it should also be equitable. we talked about the idea of equity. policies intended to benefit or penalize select individuals or groups riddle the tax code. these result in a measurable, unintended consequences. now fairness is subjective. tax fairness reduces the number

of provisions that favor one group and not the other. and the doctor talked about this this morning as well. a plan should be efficient. economists like efficiency. but because the tax code alters market decisions and areas such as work saving, investment and job creation, it impedes the economic growth and reduces tax potential. it also should be predictable. the negative effects are resulting not just from what it does today but from what it may do in the future. such deters economic growth, in environments conducted to growth thus increasing revenues. and requires a tax code that provides near and long-term -- i've often jumped because of the tax extenders you hear about that we now have a permanent state of temporary tax policy. that's not efficient for economic growth. now, we've also heard this morning about how congress prefer a broad tax base with lower marginal rates. because the tax rates drive the decision at the margin of what to do next.

you do more work more saving or me leisure because it's too high. broader it's more efficient because you're not treating some forms different than others, then reating a bias. a little caveat. i say generally before a broader tax base but base broadening shouldn't be a trade-off for other provisions and evade an attempt to achieve revenue neutrality to achieve the cost of capital. for example, increasing the length of depreciation schedules, that's not a good trade-off for lower rates. personally, we shouldn't focus so much on neutrality at all. one of the points steve mention is the scoring. i don't want dynamic scoring debate either, but i can tell you we should focus on the right policy provisions free economic growth competitiveness and job creation. the taxes we have today does not do that. so we need to actually get rid of it, forget about the revenue

impact and realize that down the road this will pay for itself. the current united states tax road severely distorts market decisions in the allocation of resources. tax code hampers job creation, impedes economic growth and ref knew potential, and throughout the discussion today, also please keep in mind where i teach my students only people pay taxes. if you take one thing away from tax policy, corporations don't pay taxes. people pay taxes. if you tax a corporation, you're either going to have a lower rate of return for investors. you're going to have higher taxes on the profits or higher prices on products. so consumer pays for it. or you're actually going to be taxing play boar in the fact the labor price you pay will be lower because that money is going to taxes. they may develop countries now reducing the corporate tax rate and restructuring 2 corporate tax systems to make them simpler. the united states federal government, though appears to be taking the opposite approach. i'll note some states throughout the united states are lowerring the corporate tax rates and

offering competitive tax brackets on businesses. you can see that in the southern states. numerous provisions increase uncertainty and cost for american business. this drives competitive profit corporations to minimize their tax exposure and defer income overseas. and for some to reincorporate outside the u.s. even worse some u.s. companies take out date in order to maintain income overseas to avoid the high u.s. tax rate. unless we reform them, this country would fall further behind in global competitiveness. with the tax rate so much higher than other countries, u.s. companies must tourn to accounts. sometimes the tax department is the most profitable section of the business. companies use engineering tactics using tax code preferences. through various transfer pricing arrangements, accountants can

improve their competitiveness. the more you tax capital or labor, the less you get. it also makes clear that incentives matter. again, it's sort of a fundamental in your gut and you know it. if you tax something, you get less of it. if they're trying to raise the covert tax rate, they obviously want less corporations. if they're trying to raise the capital gains rate, they must obviously want less capital and less savings. if they're trying to raise marginal tax rates they think we're working too much and should take more time off and not work. that's the basic theory of economics. unfortunately some people don't seem to get it. the one thing i say is we should not be raising taxes. ft tax rates should be lowering them. too many about what should we do? should we raise them? lower them? how do we have a better tax system that encourages jobs and growth, and how do we focus on

the spending side? and how do you get the best revenue system and spending system that meets your demands? right now we have politicians saying we're going to tax you here. we should say what are you willing to pay in taxes? here's what it is. we're not having that discussion today. just to give you an idea. economic plans that looked at the tax increase of 1% of gdp reduces output over the next three years by nearly 3%. so raising taxes results in less economic output. i also want to point out tax rates. i have a chart. i'll put it up so c-span can see it. and basically realize the excess burden square rate of the tax rate. so you get gains from reproductions and harmful losses from raising tax rates. if you double the tax rate, you don't just double the deadweight

loss. it can be three, four, five times greater. steve got this when he talks about the rate reductions in capital accumulation we can do on the tax code. doesn't give you a one for one trade off. it's a multiplier. and that's really important to keep in mind. i would also sort of point out that there are a lot of legislative efforts right now attempting to treatment the symptoms and not the cause. those that are doomed to fail and exacerbate the existing problems. policies trying to penalize them will only exacerbate the problems and move them more so overseas. they will continue to languish and will create troublesome results with further loss in american jobs. and further erosion of the u.s. corporate tax base. and again harmful tax policies with savings, investment job creation really hurt economic

growth. to sum up and conclude, there is broad consensus amongst academic research as to which key policies are the most likely to promote solid, sustainable kmik zbrout economic growth and revenues. again, the more you tax capital labor, the less you get. it also makes clear incentives matter. lower the corporate rate, the individual rate on both sides. one of the keys to successful individual reform is to move away from a spending system that depends on an easily manipulative tax system. this will increase stability and lead to added employment and perhaps most likely increase revenues. as steve, dan and the doctor pointed out as well we should have no double taxation. lastly, reduce bad incentives. tax policy is essential. no more temporary tax policy.

let's make it permanent. let's make a reform and do that for the sake of the country, economic growth, and for revenues. thank you. [ applause ] >> good morning. david introduced me as your recovering tax attorney, and you probably think that i'm going to start off with a lawyer joke, and i know a lot of them. but i quit using them because i found two things to be true one is, it irritated any lawyers in the audience and the second is everybody else thought they were true. so i am here as a proponent and have been if here for 25 years of getting rid of the income tax system we now have both corporate and personal, gift tax and estate tax and going to a national retail sales tax. it started off in the '90s with

the tosei and schafer plan. then we went to a fair tax a 23% national retail sales tax on goods and services. and you can learn about it if you want at fairtax.org. i won't get into economics. but i think we're all taxing about taxing consumption. i'm talking about what i consider the purest way of taxing consumption, which is at the retail level. now a couple of things have been said that i really believe are important. most of the other, in fact all of the other plans, which involve using the income tax as a part of a way to do this require each of you in the audience to file a return. i don't know if you remember he used to hold up his -- i debated him his one-page tax return.

and i would hold up mine. and individuals don't have a tax return. corporations no longer have the deadweight cost of having to comply with either a bat, which they're doing in europe, or the income tax. because again this is a tax collected by retail providers of goods and services. not the people that provide the inputs. as far as economic growth. i think the economic growth from all of these plans are very similar. i'm not an economist. but i can read and i've read -- each of these gentlemen have written very well on the topic. and i believe there's no question we're going to have more economic growth. i think one of the issues that we probably should look at, and it was brought up because it was one of my initial problems with the consumption tax back in the

'80s. and that was complexity. because in the '80s i was, as a tax attorney, very, very, very concerned with the enormous cost to economic growth and the sanity of my clients from the tax code. and i was in favor of a flat tax, and i've stayed that way and until i started coming to washington and following what congress did. and i began to believe that may not be the way to go because any kind of income tax can be tinningerred with. but one of the issues back in the '80s also was compliance. it really a concern because you have a lot of people e vating the income tax, but do you want a system evaded even more easily? well, times have changed.

over 90% of retail sails are actually collected by -- anybody want to take a guess? less than 10% of merchants. 90%. think about it a minute. the walmarts, the targets the the amazon.com. all of these people are collecting, were most of these, for all of them, it's an accounting situation that's most important. they're going to collect the tax. you look at the ore thing you say, well, what about the remainder of that 90%? well, back in the '90s. ernie, the vice chairman of the board of equalization in california, which is the agency that collects the tax was telling me they were getting in the high '90s of compliance. i thought that was interesting. last friday i had a conversation

with george runner, now in the same position. he's the vice chairman. he sent me -- because i asked him. i said send me an e-mail. i would like to get this. but he says they collect 98 pblgt of the sales tax that's owed in california. 98%. do i think a retail sales tax of 23% is going to result in the same time of collection? probably not. you're probably going to have a lot more incentive to evade. but it's still going to be much better than the income tax we presently have, and that's one of the issues that i have. when i was talking to some of the members here who were advocating. not on this panel, but members of congress about the flat income tax as a vehicle for getting to the consumption tax.

my question was, what are you doing to do about evasion. when you run a set of estimates of revenue what is your evasion factor? plet me just ask you a quick question. how many people in the room in the last six months or year have lad an opportunity or know of with unto get a service or a product at a substantial discount for cash? how many? h anybody? okay. some hands are going up. do you think that's because it's easier economically? accounting wise? no. in most of the groups i speak to almost all the hands go up. and they all say no. it's they're not paying tax. they found a way to do it. there's a study on the the

underground at the university of wisconsin in madison where they talk about in 2000 it's either 2010 or 2011, they felt like as much as $10 billion being evaded. and you look at it and you say, okay, i'm going to bring the rate down. i'm going to bring it down to 15%, 20% from where it is. that will make it more attractive from the people evading to come in. except, there's one calculation left out. and that is if you have an evasion of the income tax, you're also evading social security. you're also evading any state taxes. so if you bring the rate down to 20%, and you're self employed you still got a 15.3% social security tax.

you could still be paying 40%. i don't think it's going to reduce the invasion unless you get draconian in your enforcement, and i don't believe that's really possible today. one of the side effects of obamacare is i know a lot of people who have left corporate employment and are now contracting because they can get much better tax benefits which maybe that translates. that's why i believe a retail sales tax makes more sense. i've said this to curtis in a debate and i've said it to dan and others. if they were king and could guarantee that the flat tax alternative was going to stay in place for 20 years, i'm resigning as president and chairman, and i'm moving over to

you. but i asked the question trying not to embarrass anybody but how many people feel that the flat tax is going to be flat in five years, and i almost never get a hand that goes up. and this is out in the, you know, i'm here very little compared to my time across the country. people just don't believe that it's going to stay flat. and i don't believe it's going to stay flat. whereas for the retail sales tax, it's more transparent, it's much harder to adjust. thank you very much. >> thank you all if r coming. it's been a really good discussion. i think steve and jason and steve and dan have hit on all the topics we have hit on. i think we can sit here and talk about tax reform. i want to hit on a few things currently going on in the debate. so going back to something dan said at the beginning.

he said that there's broad acceptance that tax rates matters. and that's largely true. but there are actually people out there who push back against that simple proposition. go back a couple years ago. congressional retail service. right in the middle of the election said tax rates don't matter. pretty bluntly said that. when a few of us pushed back on that to say this is pretty common sense and well understood that tax rates do matter, we were accused of being anti-science and not really being true to research. and i got attacked as well. it was kind of bizarro world. we were stating fact and being told that wasn't true. lt it basically says the the

accumulation of capital is going to lead to the ruination of capitalism. and in a way that he proposed to deal with that was to levy tax rates. taxing capitol over 100%. so there are people out there who will disagree where the simple propositions. and that's why it's always important to keep making the case that tax rates do matter. they have an impact. and it's best to keep them low. one other thing that's come up through many of the presentations is there is no one way to get to a consumption tax. you can get there a lot of different ways. so you'll see a lot. this happens during presidential campaigns. there's a lot of fighting among conservatives. what is the best plan. part of the effort we've been doing here is to educate conservatives and the public and lawmakers that we don't have to

be fighting so much over what the actual plan, what it looks like on the surface. i like to compare it to a software program. they all execute the same functions. whether it's a new tax, a business transfer tax or some hybrid to combine elements of all those taxes. they're all getting us to the same place. rather than fighting over what we want the user interface or whatever we want the taxpayers to be how they're actually paying the taxes, we should be saying we're all on the same page. we want the consumption tax. and we all understand the benefits that will result if we get a system like that. but lately the tax reform debate has shifted somewhat. for a long time it was revenue

and distribution are neutral. go back to 2012, it raised the same amount of revenue as the current system. it didn't shift the tax burden up or down the income scales. last year the then-chairman of the ways and means committee ben kamp had a revenue distributionly neutral. coming into this year, however, that whole constraint has changed. senators put a tax form plan both a big tax cut, or is a big tax cut. i think we're unsure what it does to tax distribution. i think we'll learn more about that as we go forward. and then senator paul put out a tax reform recently. i call these the new generation of tax reform. and they have a great -- they have a huge benefit. they can be much more pro-growth than traditional revenue and traditional tax reform. if you look at the tax foundation found they found it would grow the economy by 15%.

chairman is getting 1% or 2% growth. they can also -- one of the things that happens when you do tax reforms is you set winners and losers. it's just the nature of doing tax reform. when you have revenue neutral tax reform probably end up with more winners than losers, but you'll have an awful lot of losers that will scream really loudly. you can make a lot more people a lot better off and make it easier to pass. all that said, it does come with challenges, though. we are obviously on a tight budget environment here in washington. our friends on the left will immediately point out, as they always do with their reports on the pax polltax policy center that it's a great big tax cut to add to the debt and have monumental negative economic impacts because of that. they'll also point and depending on how the tax burden has shifted, they'll point out that perhaps the rich are getting tax cut, the middle class is paying

more. that probably shouldn't work out that way if the tax reform plan is done correctly, but they're not shy about fill ugh in details to make that fit their narrative. again, go back to 2012. they did that to governor romney. all that said, these -- these collages are much easier with if we have a dynamic score. we have gone a long way to getting dynamic scores. the senate, it's questionable. be if you have a dynamic score of a tax plan it's a lot easier to deal with the issues. think found again that the lee/rubio plan is $1 trillion tax hike. that's going to get us roughly back to the historical average. we can certainly afford to cut taxes that much. so that dynamic scoring will go a long way to determine whether we can do a successful tax reform plan like the new generations have put together. the last time we did tax reform was 1986.

back then individual tax reform led the charge. the code was so complex. no one could do the tax returns on their own. today, it's opposite. business taxation is leading the charge: we are so far out of step with our national norms we've become so competitive, that's really the leading factor driving the desire and the debate here in washington. and part of the reason that exists and the doctor got into this a little bit with complexity, but technology has made it easier to comply with, which makes it easier to create mischief in the tax code. not too many people do tax returns by hand. did anybody do their tax return by hand? actually fill them out? well, you're quite a trooper. i did it once. i deal with taxes every day. i did it once. my wife and i moved from one state to another. we ended up with six tax returns.

so i did them out all by hand. sent them in. i got all six back. two from the irs. two from each of the different states. i got them all wrong. i never tried it again. turbo tax is cheap. it's easy. it's simple. i did mine on a snow day with my kids screaming in the kbgd. i background. i thought i could get it up and started and got it done before i knew it. that has taken a lot out on the individual side. we saw this in polling we commissioned. there isn't that drive. it's going to come from the business side, which creates a new political dynamic. all right. so it's a lot easier to go back to the district if you're a member of congress and the united states and say i want to reform the tax code because of the damage it's going to you and here are the great benefits you're going to have. that's a good message to bring back. not so easy to go back and say ge is getting killed out there. we're going to make sure it can

do better. we're going to make sure that gm or microsoft or google whoever it is, that's a really tough sale. and that's part of the reason why we're having a hard time getting going. also because it's really hard to do tax reform for corporations and leave enemies alone and they need reform too. but once you're going onto the other side of the business community, now you're on the individual code, and we're opening up a ball of wax that nobody really wants to get into. given the current political debate. with that, i'll end, and i think we can take some questions and answers. answers. >> all right. we have a reasonable amount of time for questions to the panel. please wait for the mike and give your name and institutional affiliation. request questions?

peter? wait for the mike. and so other people can hear on television and the web cast. >> my name is peter ferarra. i'm with the heart land institute of tax land foundation. my question to you is doesn't the rand paul tax reform plan address a lot of the issues you just raised? >> which one? >> rand paul. well, the -- the individual side as well as the corporate side. ch the pass-throughs. all of that is taken care of in one swoop here by the rand paul tax reform plan, isn't it? >> i think that's important to point out. when i talk about the difficulty of starting up the corporate side. i'm talking about how tax reform is usually looked at by people here in washington. which is that we have to fit within all the boxes that the neutrality and all the things that go into the tax form debate here in washington. and it's more of an issue here in the next couple of years because of the dynamic with the the white house, and in congress

in terms of really the president said he's only interested in doing corporate tax reform but never said business tax reform. so he'll do corporations but leaf leave the businesses alone. it's very difficult to do. you have to find a way to do them together. and so it just -- we're going to be at lauger heads for the next couple of years. if you do a fundament tax reform like senator paul proposed or anybody that we talked about yeah, you solve a lot of the issues because you don't have them. but the doctor talked about pulling the tax code out by the roots what you're doing. you're pulling out by the roots and starting from scratch. >> if you can fit in a box at the washington establishment, you're never going to accomplish anything. boxes are all designed for us to lose from the beginning. and revenue neutrality is on the post revenue reform. >> i'm glad that a lot of candidates are talking about tax reform plans that are also tax

cuts. i'm glad we're also talking about dynamic scoring to try to get a more accurate assessment of what the revenue implications would be. but let's not forget there's probably zero chance we're ever going to achieve anything on tax reform unless we also figure out some way to cap and restrain the growth of the burden of government spending and that's why it's also encouraging to see that there's been movement, you know, not from the white house, of course, but from congress in terms of structural, genuine entitlement reform because if we don't get ahold of government spending with the demographic changes, we're going to wind up like europe, and then the only tax reform we'll get is adding of that on the current monotrosty of income tax. so no, i don't worry about whether or not we're going to have revenue neutral tax reform in the short run, but we do need to push for tax reform with a push for genuine budgetary and entitlement reforms as well. >> next question.

well, let me ask a question of the panel. we have not addressed in any detail international tax questions. the united states is the only major industrialized country that does not have a territorial system. there are a few minor or smaller countries that do. and we also of course, our income tax is not border boarder adjusted. do you think that international tax considerations should be a major part of fundamental tax reform and what do you see as being the major components of positive changes in the international area? maybe just go down the panel. >> well the first thing for those that don't have the the misfortune of having to follow the this to too closely. some definitions. worldwide taxation means that the ira taxes american companies not only on the income here in the u.s. but we tax our companies that are earning money

overseas but of course, all those other countries where they are earning money those countries are imposing taxes, as well. it's a bizarre form of double taxization and our companies get a credit but never really works out well and you combine that with a high corporate tax rate. it puts u.s. multi nationals at a disadvantage which is why most plans, any good tax reform plan moves to territorial taxation and that's the common sense notion you tax what is earned inside your boarders and that's it and so you should have territorial taxation as one of the key pillars in addition to the a low rate and taxing income only one time but it's for only a narrow subset of people tend to focus on this but critically important for the criticalness of your company and the companies they are in. >> the notion we ought to have a global tax system, based on capital export neutrality. a company who is going to put

together a factory should not be influenced by taxes whether here in canada or here or europe. the flaw in that argument, which leads us to say let's tax them equally and if canada has a lower ad on it we'll put tax on it. the flaw is it assumes it's a certain amount of capital being formed. the factory is going to be created. if you over tax it, it might not be created at all or if it's going to be worthwhile to put a factory in canada and we put an extra tax the on it we won't put the factory in canada a french firm will instead of us. the whole thing is based on the misconsumption that there is a fixed amount of capital and we're deciding where is it going to go and might as well be here instead of there. that makes no sense at all. each country will build out its capital stock until you used the to potential profitable opportunities. if that company has a lower tax rate, there will be additional

capital formed. that doesn't mean for example ireland is stealing capital from germany. if the germans put the irish tax rate on the irish subsidiaries on the german companies, there wouldn't be irish somebody subsidiariries. it's based on a misconsumption. the weirdest thing to me, if an american firm is thinking of buying another american form for economies for scale a french firm can come and out bid them because the french won't be paying additional french taxes on the earnings in america. it is just simply bizarre. we're treating foreigners better than we're treating ourselves. i just don't see the point in it. it doesn't get us any money. it costs us opportunities to invest aboard and export through somebody sidubsidiaries and makes us weaker. of usually caught up after

devastation of world war ii but we're making it worse than it has to be by shrinking our role in the world with our crazy tax system. >> it's hard to follow these two. they say, i'll just add a point i forgot to make earlier. we start thinking about tax reform but we need to think about territoriality but keep in mind the ideal corporate tax rate is zero. the ideal capital gains tax rate is zero. anything above zero creates efficiencies, the lower the rate we can get the better in general. if we had a really, really low rate the worldwide tax wouldn't matter if we were lower than competitors but dan is right, looking at reform, the odds are probably not going to get zero. i'd like to. ready to consider a rate and move towards it at the same time. >> well, jason is making a good case for the fair tax because

the corporate rate is zero and the that is in fact what some of the economic studies show that you are going to have attraction of capital coming in because as a recovering tax attorney, i will confess that when it was legal, i was a frequent visitor of the bahamas and cayman islands and all and the reason was they did not have an income tax and we set up trust and different things and again, when it was legal, and were able to bring tax payments very, very low because of that, because capital is calculating its return also based on what it can take home after taxes and if you have no tax on savings and investment or on the corporation itself, you're going to have a lot more people looking fav favorably at the united states to invest capital. the second thing is boarder adjustability and economists

here should be explaining this not me. basically what we do not have under the income tax presenlttly is anyway to make the type of adjustments that our trading partners do because when they export goods from countries that have value added or other consumption taxes they rebate the taxes at the boarder, they come over here and effectively not taxed. it's a very very low rate of tax because we don't tax on the imports, we tax on any profits made from selling the imports. what we're talking about with the fair tax and with the other types of corporate taxes that are being proposed here is that there would not be the tax carry, in other words, the cause to government carried when we go overseas and conversely when they send products over here, they would be subject to the same tax our products are.

it's very very important to have boarder adjustability and very, very important to be in the forefront of attracting capital from not only here but some of that assume 15 to $20 million that's offshore now that really isn't in any country that's looking for places to go. >> i think his point any tax reform plan that establishes consumption tax base should be territorial, should only tax income earned here in the u.s. one thing i want to add about the misconsumption of a worldwide system, part of the fallacy is that we have to have a worldwide system because the businesses create operations overseas that they would have created here. that's not true. businesses open up operations aboard to chase new opportunities and new markets and now demand abroad. we want our businesses to be chasing new customers. we want them to be selling more.

when a company expands overseas, it expands back here. the economic literature is clear on that. more efficient, creates cynergies and creates jobs here at home. >> can i add something? the doctor mentioned about one of the biggest economic books the modern era and i think there has been a lot of discussion but some lessons haven't been learned. r is greater than g, the ray of return is greater than the growth in the economy and those that invested in the market did better than those wages in the economy and creating income equality. we're right, we need to tax capital and tax those who aren't rich anymore. if you're trying to increase g, why don't you increase it through tax reform, government relations and reduce the taxes on labor so more folks get a return on labor. the second lesson is, if r is greater than g, why don't we do

our best to make sure people people have access and plans so it's interesting how if you take the research at face value and some folks said there is problems with it but we need to change the policies. >> steve? >> there are problems with it. >> i know. >> r is greater than g if you reinvest it and get the wealth inequality but you don't. when you retire you live off runs on your capital. it's not being reinvested so wealth and equality isn't rising. the poor guy didn't understand that some people in retirement have to draw down on dividends and can't reinvest all of them. that completely trashed this entire argument. mike and our staff ran the plan through our model and it crashed gdp by over 15% and that include add drop in labor income of over 15%. that was on all levels of wages

and labor low income people, high income people, the plan made no sense at all. i want to emphasize one thing all of these consumption based plans are in effect helping with the capital formation here. they are all in a sense either explicitly border adjustable to the same degree but one happens because if you're saving it, you're not consuming it and if you are consuming it it falls on the export and import. >> they are better on the international trade in and about the same way. so the that is something the international benefits of doing this perhaps are over stated from just going to a flat base. it's the territoriality that gives you the additional kick of not penalizing those trying to adjust abroad. that's a different question.

territorial is different. they are both very important. the business community is not waiting for the congress to get off the dime here. they are investing more and more abroad and if necessary, spending off foreign subsidiaries or arranging for their headquarters to move overseas. this is do it yourself tax reform. they can't wait for you. burger king is a very funny case in point. burger king had foreign operations they didn't want to manage so spun off tim hortons and tim hortons got bought out and grew and turned around and bought burger king. p this was not a vicious plot to get around the international attack rule, it just happened in terms of economic growth. it's one of the funniest cases out there but this is going to happen more and more and more as time goes on if congress doesn't get off the dime. >> we need to wrap up this panel. the next panel is here. so please join me in thanking

our five panelists. [ applause ] [ applause ] >> thanks david. for the last panel of the day i want to introduce steve moore. steve is the distinguished visiting fellow at the heritage foundation for economic freedom

and opportunity. in addition to his role at the heritage foundation, he's a contributor to the "wall street journal" and fox news. served under former chairman dick army of texas and budgetary affairs and special consultant to the national economic foundation and president regan's commission. he holds a masters degree in economics from george mason university and in 2010 he was awarded the university of illinois alumni of the year. please join me in welcoming steve. [ applause ] >> well, good afternoon, folks. thank you for being here today. we have sort of book ends. we've got the two leading advocates of the flat tax here today starting art and ending.

both of them have probably been the two most influential people in promoting this idea in the last 25 30 years. pleasure to have art laugher here. you paymay know him after being the architect and man who turned ronald reagan and jack kemp on to supply economics. there is a great book out about jack kemp and fred barns and tells the whole story of how arthur laugher and jude and other leaders turned around the country in terms of promoting their ideas and getting ronald reagan to sign onto the ideas and the movement that not just only changed the united states but really changed the world economy economy. to the that we owe arthur laugher gratitude. he's the arthur of many, many books including most recently an inquiry to the wealth of states that i wrote with arthur and we

have two other arthurs which is about why some states are growing so much faster than others. without further a due, i want to introduce my good friend arthur laugher. [ applause ] >> are you going to sit right up there, steve? so i can just sort of -- that's impressive, don't you think? steve sitting there? i can look right at the back of his head the whole time. see how will you know when i do a facial thing? how will you recognize my facial movement? i'll go like this. let me -- i'm going to have a little fun with you today if that's all right and go through some of this. sean, how are you? good to see you, sir. howard. golly. how many of these i thought all of you were dead by now. one of the real pleasures when you get to be my age of 75 is that your enemysemyies have died.

hilary is still around, i guess. [ laughter ] >> as long as that's happening. what i want to do is start with really simply incentives. there are two types of insen the the -- incentives in this world, by way of illustration, if you beat a dog you know where the dog won't be. but you have no idea where the dog will be. it will take off like mad but you don't have any idea in what direction. positive incentive -- that was negative. the stove doesn't care where your hand is as long as its not on it. positive incentives tell you what not to do. positive incentives tell you what not to do. if you feed a dog, you know where the dog will be when it comes to food time, feeding time, you know exactly. so you got to the look at the world in terms of these incentives and when you look at

taxes, which i'm going to talk to you about. taxes are a negative incentive. they tell people what not to do. do not report taxable income. they don't care how you don't report taxable income they care that you don't report taxable. you can use vacation, avoiding under ground economy going out of business. it's a negative system so you have to understand taxes are a negative system. and when you look at it, you understand it intuitively. why do we find speeders on a freeway? to get them to stop speeding. why do you find, why do you tax cigarettes? to get people to stop smoking. why do you tax income? you don't do it to get people to earn less income. so when you look at a tax system, what you want to make sure you do is recognize the

purpose and the purpose at hand is to raise revenues. so what you want to do to the avoid the damage is you want to collect your taxes in the least damaging fashion and obviously spend your proceeds in the most positive fashion. but you've got to understand negative and positive. for example, you never want to mix a positive in with a neg thetive. you just don't. a child tax credit is perfect example of mixing positive with a negative system. if you want to reward people for having children, which is fine, if you like to do that, i have six, steve, i'm all for rewarding people who have lots of kids but right them a check. don't give them a tax credit. write them a check. there are lots of people that don't file tax returns and you

get distortions in the system. it's really important here why would you ever ever, ever want to cut taxes on people with high income instead of cutting tax rates with people with low income? why would you ever want to do that? i mean what on earth would generate someone to cut the highest tax rates and not use that to cut the lowest tax rates? let me go through it with you just a couple of things on why you would want to do that. the first thing is if you're looking at a cost benefit analysis, i'm going to the use the example of john f kennedy if i can. john f. kennedy in the 1960s, '63, '64 he cut the high marginal tax rate and cut the lowest tax rate from 20% to 14%.

all of you with me? if you look at it in percentage terms by cutting the highest tax rate from 91 to 70 that's 21 percentage points divided by 91. that's a 23% cut in the highest tax rate. by cutting the lowest rate from 20 to 14 that's a six percentage point cut. that's a 30% cut in the lowest rate. all together with me? if you look at kennedy cut the highest tax rate from 91 to 70, 23% cut and lowest rate from 20 to 14, that's a cut and if taxes were all that mattered, you would be perfectly correct in saying that he cut the lowest tax rates by more than the highest. remember, taxes are not the issue. people don't work to pay taxes. people work to get what they can after taxes. that's very personal and very private incentive that motivates

them, which is not exactly taxes. in fact, it's the earnings rate. it's the incentive rate that matters. let me take you through the incentive rate. a person in the highest tax bracket before kennedy cut that tax rate from 91 to 70, if they earned a dollar they had to pay 91 cents in taxes and their after tax incentive for earning the dollar was nine cents. all together? in the lowest bracket, guy earned a buck, paid 20 cents in taxes and his or her incentive was 80 cents for earning that dollar. all together? after the tax cut by cutting the highest rate from 91 to 70, the incentive, after tax incentive rate for the person in the highest bracket went from nine cents on the dollar to 30 cents on the dollar. now after the kennedy tax cuts, they earn a dollar, they pay 70 cents in taxes and allowed to

keep 30 cents. if you look from the standpoint of incentives, that's a 233% increase in incentives for a 23% cut in tax rates. that's a 1-10 cost benefit ratio looking at static revenue loss to an incentive effect, you get a 1-10 cost benefit ratio. you follow me on that? if you go to the lowest rate before the tax cut, the guy earned a buck, paid 20 cents in taxes, her incentive was 80 cent as dollar going down to 86 cents on the dollar, that was the incentive. a 7.5% increase that's a the greater increase in after tax incentives for every given

static dollar of loss. that is a key reason to cut the highest tax rates the most because you get the greatest trade off between cost and benefits from that. are all of you following me on this? please do. i hope you do. second thing i want to go through is in taxes, marginal tax rates are the key or if i should say it to correct myself, margin incentive rates are the key for the tax cuts. you always want to look at incentive rates and on the margin. when you look at a tax return in the u.s. every single taxpayer pays the lowest tax rate. every single one of the taxpayers pays the lowest rates. as you go up in the brackets fewer and fewer people pay the higher tax rates until you get to the highest tax bracket. if you're at the highest tax bracket, everyone in that tax bracket is paying that tax rate

on the margin. when you look at the actual tax brackets and the filing of tax returns and i don't remember the year but less than 2% of all taxpayers actually pay the lowest tax rate as a marginal tax rate. all the rest of the tax cuts are info marge l. if you cut the lowest tax rate you'll have an incentive effect between labor and leisure. the only one where you'll have the substitution effects are on a small percentage of people in the low estest the cutting the margin rates and cutting the substitution is between labor and leisure. another reason for cutting the highest tax rate. the last one i want to go through here with you, which i think is very important is rich people are different than poor people. they have got money. they have got the means to do

things that poor people don't have. and in fact, rich people have the ways to do things that poor people don't have. they have both the ways and the means to change their taxes. they can hire lawyers accountants, deferred income specialists, favor grabbers congressmen, senators. when you see a group of people hanging with the president, don't for a moment this is a group of street people explaining what it's like to be poor. they are switching positions between goldman sachs and the white house. i moved from california to nashville, tennessee purely and simply for the income tax. i bought my house in tennessee with my first year's tax savings. i had to hang up pictures i don't know if i told you this but i had to do water colors and beach scenes and bikini girls

all over the house for the first couple drk i had salt sprays in every room and big sun lamps and all that and beach boy music in the background but i got over it. after three years the statute of limitations was gone and i can go back and visit. rich people with change the timing of their income. 401 ks, they can change the location composition of their income. i mean they can go from unrealized capital gains to income. just, they can change the volume of their income. people who are high income have a far more elastic and forgive me for i don't know how many of you are economists, a far more elastic supply of taxable income to the system than lower income people. the reason you cut tax rates on the highest group is not because you love rich people, although there is nothing wrong with rich people, as long as they help me along as i need and if the

heritage foundation isn't the place for that steve i don't know what is. you get more bang for the buck. the cost benefit is better. the higher tax rates are per dollar in the highest brackets you find a higher bracket a lot more people on the margin than you do in the lowest brackets and thirdly find in the highest brackets people have a lot more ways of changing income what you want to do is you can see the broader the base, it leads you to a flat tax. i want to talk about redistribution and it's a really important theory for taxes and government. redistribution and this is picky stuff if you forgive me. whenever you take from someone who has a little more and give to someone who has a little less, you with me?

that's the sort of quintessential definition of redistribution. you know if you take from someone who has a little bit more, you've reduced their incentives to earn income and produce a little bit less. if you give to someone who has a little bit less, they all of a sudden have an alternative source of income other than working and they, too, will work a little bit less. the theory here is really explicit and uninbig use. redistribution comes at a cost of lowering total income period. that's math. that's not economics. that's math. when you take from someone with more, they have incentive to produce less. you give to someone who has less, they have incentive and both parties will produce less. the theory is simple, whatever

you redistribute income, you get less income. the more you redistribute, the lower income will fall and in the andextreme, if you redistribute you will end up with zero income totally. you can see that. p if you did redistribute income totally, where everyone earned above average income, that person was taxed 100% of the excess and the on one that earned below the average income they were subsidized up to the average income. if you actually did that, everyone would end up with the same amount of income, it would be exactly equal. if i actually did tax everyone who made above the average income 100% of the excess and i did subtize even below the average income up to the average income, we can stipulate today counsel everyone's income will be equal at zero. just remember these are the theories when you go and deposit

why you want to look up a flat tax and why you want a flat tax to be comprehensive is because all except for the speedy and the cigarettes i.e., those taxes to change people's behavior, the joke i like to the the use is we americans i guess don't like drunk people smoking while we shoot each other. you know, except for syntaxes which are there to change behavior. what you want to do is do the least damage to the system in collecting the revenues to run the government. that's what you want to do. you want to collect your taxes in the least damaging fashion and spend the money in the most positive fashion and when the last dollar of tax is collected is little bitty less painful than the last dollar of money spent is beneficial you stop already. that's where government stops

spending. that's the correct and optimal conditions. what you want to do on taxes if you really want to get to where you have the least damage done by collecting, unless you know the net supply e lastlasticity of every factor in the world if you don't, the best analysis is to have assume all factors have the same elasticity, so what you want to do is have the lowest possible tax rate on the broadest possible tax base to provide people with the least incentives to evade, avoid or not record taxable income and give them the least places to place income and be exempt from taxation. you want the lowest possible rate on the broadest possible base for a tax system. you-all there? i mean obviously the rest of the program should be you want spending restraint government spending is taxation. government doesn't create resources, government redistributes resources. whenever the government bails someone out of trouble, they put someone else into trouble.

believe me when i the tell you. sound money, you need sound money. you need sound money. you need free trade for you guys here because heritage needs this lecture. free trade is wonderful. there are some things america produces better than foreigners. there are some things foreigners produce better than americans. we would be foolish in the extreme. if we didn't sell them those goods we make better than they do in exchange for the gods they make better than we do, it's a win, win. gains from trade david ricardo, hello. that's what it is. china is not our enemy. china is our best friend. without china there is no walmart and without walmart there is no middle class or lower class prosperity.

sanctions on north korea, see how it caused them to see the light. america, you're right. we've been sanctioned 65 years and see the right of free market, no. we got a population that's hostilized. when did we start sanctions in cuba? they are how to win friends and influence people. free trade. lastly regulations. a low-rate broad base tax. most people think it doesn't make sense politically. i did a proposal a long long time ago called the complete flat tax that got rid of all federal taxes. all of them. covered personal income tax, gone. corporate tax, gone. all payroll taxes both employer and employee gone. excised taxes gone.

medicare and medicaid taxes gone, gone gone, capital gains taxes, unearned income taxes, every one of those gone, all of them gone. got rid of federal taxes. with the single exception of syntaxes let them and they are not a large portion of total tax revenue. if you replace static revenue, static revenue full employment all federal taxes with two flat rate taxes, one in business net sales and one on personal adjusted gross income you could match all federal taxes today with a tax rate of about 12% on each. can any of you imagine if we had no federal taxes in this country except for two flat rates, one in business net sales and personal loan adjusted income at 12%, can you imagine what this country would look like? we would be selling cars into central china and the boom of

the sen kurpcenturyiescenturies. i'm taxing gdp once when spent and once earned. of obviously the reason that doesn't come to 20% is there is reasons for unoccupied homes and corporate profits from a government corporations and stuff but that is where you want to go. now that tax, i was able to conn the governor jerry brown to do that. jerry brown in a democratic primary, let me run on this proposal. he raised 1% because he wanted more revenue i guess. you can tell just looking at him he likes to spend. so we went on a flat rate tax of 13% on business net sales and personal loan adjusted gross income. he went from eighth in the race to second. i think we lost in wisconsin by one vote or something. really close in wisconsin. going into new york, jerry brown

had bill clinton in his cross hairs. this is democratic primary lefties, weird freaks and going to new york. we were catching up in the polls. we almost had him. three weeks out of the new york primary, jerry announces his running made is jesse jackson. needless to say, we didn't win. but jerry brown literally came in second in the democratic primary in 1992. the first major presidential candidate to get on getting rid of the income tax in history. let me take you through one more where it shows it's popularity. 1986 tax act and even though the '86 tax act none of you are old enough to remember it, you may be, barely. i love picking out those howard, there you go. the '86 tax act, we cut the highest tax rate from 50% and dropped it to 28% on the fat cat

richies. all the little ones, you know. then in case we missed a couple fat cat riches, we cut the corporate rate from 46 to 34% which by the way, at that time put us the lowest corporate tax rate at that time. 35%, now we're the highest so steve moore documented that. cut the highest rate on income from 50 to 28. cut the lowest rate from 46 to 34 and just to make sure we didn't miss anyone and didn't show our distan forjust to make sure we raised the lowest rate. that will teach you to be poor. we raised the lowest rate from 1.5 to 15%. we got rid of 14 tax brackets,

15-28 and got rid of deductions and kale out static revenue neutral. exactly. regan said if it raises $100 i'll veto it. this is the constillation of tax rids, period. can any of you imagine that? i don't think there is a republican to vote for that today. the vote in 1986 the vote in the senate in 1986 was 97-3. three voted against that bill, simon with the bow tie, and the 11 just retired from the senate. mr. lefty vetted for it. my next-door neighbor voted for

it. told me six months ago is the best bill he voted for tall and pink bill bradley voted for it. mr. death tax himself voted for it. the, what's his name from delaware, joe, joe biden he voted for it. teddy kennedy voted for it for god sakes. in the house back then barbara boxer voted for it. charlie rangle voted for it. why did they vote for it? why? because it's the right thing to do. and it was the right thing to do and they voted for it and believe me when you name the

north star you believe in what you're doing, you can win that really easily. we are at a stage in history where we need to redefine the north star and go through tax codes and need a low rate broad base flat tax conceptionally clean. there is plenty of time to compromise in the middle of the legislative process. you don't have to compromise before you have even started. describe the north star and let the race be run on the north star and then when you get to the legislative process you can compromise. there are a couple others, we should have every other year we should be allowed to repeal legislation. i don't feel like that one. i also think congressmen and senators ought to be put on commission. i have no problem with them making lots of money as long as i do, too. so i would put them in what i would do with every congressman

and senator he or she took office, i would give them a shadow portfolio of $5 million and allow them to keep the capital gains and hold them personally liable for the capital losses. believe me they would never vote the way they vote today. with that, steve, i will stop and have i done enough damage? [ applause ] >> i'm going to make a couple comments and we'll get into the discussion. i was asked to talk a little bit about the politics of flat tax. arthur and the speakers you heard talked about the economic case for this but the question of course arises why is it that we've been talking about this issue for at least 25, 30 years, 20 years ago steve forbes ran for president on the flat tax and did the well but we're not that much closer to a flat tax

today than we were when steve forbes first introduced this idea. you've heard today all of the economic arguments in term thes of why this would dramatically improve the economy. i want to make some points how to sell this issue and arthur and i will engage in conversation on this. as most of you probably know, arthur and i spent many months with ran paul helping him develop a flat tax proposal and he has come up with something similar to what arthur just described, the complete flat tax, not entirely the same but has a lot of the same characteristics, 14.5 to 15% flat rate income tax. it has you know the 15% on personal income tax, on the business side, very similar to what arthur just described essentially a business and that sales tax and it has gotten an enormous amount of attention already, it's only been out

there three or four weeks but had 4 million hits on the website and they shut down the website. it got so many hits the first week the plan came out. we found that even irs agents were interested in this plan because they saw the benefits of it and yet, even at the polling that we've been doing at heritage on this concept of the flat tax, the flat tax as a concept is not especially popular. a lot of people like it but a lot don't and the question is what do we do what are some of the arguments we should make in favor of this? i just wanted to mention two or three. one is the obvious one which is the international competitiveness aspect of this and the idea of the united states having a 15% tax rate when the rest of the world is at 35 or 40% would give america an obvious huge, huge competitive advantage in term thes of companies locating here rather than aboard and one of the ways

that i like to try to emphasize the importance of this because a lot of look, a lot of people on the other side of the isle don't believe the tax rates matter. arthur they don't believe a word you say or have much of an impact where people go and capital goes and where businesses flow and many of you know just about a week and a half ago, i was in las vegas debating paul who is probably the most influential left wing economists in the country and he writes for "the new york times" twice a week and when it comes to politics, it's hard to point to anyone who has more impact on the way that democrats think than paul. we got into a big debate about states. as i mentioned, arthur and i have this book out about the wealth of states, about the fact people are moving from high tax states to low tax states and the evidence is overwhelming that this is happening. i'm not going to go through arguments but i showed paul this chart and many of you have seen it that shows tax systems in

florida created and they have a 13% income tax in new york, as arthur described and for every job created over the last 20 years in new york and california, three to four jobs have been created in texas and florida and i confronted paul cruger man with this data about hue do how do you explain this so many jobs flowing from states and they did exactly what arthur told them to do. what his response was was they were moving because of air conditioning. now that's a, that's a crazy thing to say and by the way, with everything he says there is kernels of truth. people do move to warmer states but the point i am making here is that it is irrefutable that tax rates matter on the state level. no question about it that there is a massive flow. we estimate about 1,000 people a day are moving from these high

tax to low tax states. my point is, if people would move from one state to another because of a 13 percentage point difference, they will move substantially across capital will move if you have a 20 or 30 point advantage on tax rates that we would have. that's number one. number two, maybe the most important argument in my opinion right now in terms of convincing the american people about why we need a radical change in the tax system and that's either the flat tax or what steve hays talked about national sales tax, the major, i think, selling point of this isn't even economics, it is a point about anti corruption in washington. if you look at the polling and what happened with done nldald trump i'm not a supporter and what he said about john mccain is despicable. what donald trump tapped into is this idea that washington is

corrupt, that it is incompetent and we need to take power away from washington. that's what trump is talking about. if you want to do that, what is the kind of epicenter of the power structure in washington? it is the tax code. it is that members of congress buy and sell tax favors every single day and the point i think we need to make over and over and over again is that if you wipe out all of these special preferences, all these carveouts that keep k street in business you take power away from washington, right and replace it to the people and this is a kind of power to the people initiative that i think we don't talk enough about that no longer would people have these politicians and lobbyists have the power to influence where money flows just based on the tax code. a final point i'll make about this that i think we under estimate but really important in terms of selling this concept to the american people is that you

mentioned, arpt erthur, the corporate tax. you can't come up with a worse tax. maybe you could, correct me if i'm wrong. i can't think of a worse tax than corporate income tax. we're not tax progress deucers that produce things and bring them into the united states. the thing that is an interesting element to the flat tax, the complete flat tax arthur and i put together that i would like you-all to think about is when you have, let's say, a 15% complete flat tax, this is a legal 15% terrificariff. instead of taxes what we produce, we'll tax what people bring in the united states. i believe we can go to blue collar workers and say this is what you wanted. you wanted a tax system that gives america fair advantage and that's when this plan does in spades that is a very, very powerful message to blue color workers across america that make

things and basically look at things coming in from china or japan and say wait a minute we want to compete on an equal basis. this plan that we're talking about would do that. i do think that when you look back at what happened in 1986 it was a miracle. the stars were aligned and if you look at america in 2015, it just, it just feels to me that the american people feel that the tax system is so corrupt right now and is so filled with special interest provisions that don't benefit them but benefit the corporation down the street that the time could not possibly be more right with this. so let me start with a question for you, arthur about this. first of all, do you agree with the assessment? the depressing part is on the democratic side of the isle we have bernie sander whose is giving speeches around the

country saying we should go to 50 or 60 or 70 or 80 or 90% tax rates. the economy performed well back then with those tax rates and we can have a strong economy. again, how would you advice people to respond to that argument. by the way, he's climbing in the polls with this populous argument. >> [ indiscernible question ] >> we should raise tax rates to almost 100% and drop them down to 70% and watch how the economy improves there. if you look at the history of the u.s. and post world war ii era, it's amazing highest marge l income tax rates at the end of world war ii, 92.5%. i mean, think about it for a split second. here you have the u.s. where the house has to pass the bill the

senate has to pass it and the president has to sign it and the highest marge l income tax rate was 92.5%. think about the debate in congress back there with the lefties and righties. okay okay, okay lefties say 90% is a give away to the fat cat rich. went from 92 and 92.5 and trueman cut it to 91 and kennedy cut it to 90 and cut down finally to 28%. the the you look at the trebldnd in the u.s. and world, it's moving away and we have a different world today. if you look at union rep sen sensationsen -- representation, we are a world to think that to think there will be any major change in that trend i think is a real mistake. what i think will happen is that

in 2016, we'll win the election and may be a democrat. you know this is not, this is not republican or democrat. it's not liberal or conservative. it's not left wing, right wing. it's basic basic economics. kennedy did it. bill clinton was great. ronald reagan was terrific. ignorance and blessings. >> so some of your critics say that the economy performed well in the clinton years -- >> did really well. >> and clinton raised tax rates. so this is counter to your theory. >> clinton didn't raise tax rates. come on. if you look at him, the first thing he did was push nafta through congress. seriously, you got to take your hat off and say congratulations mr. president. it was wonderful. got rid of the retirement on social security and it used to be when you hit the 62 every dollar you earned you lost ins

is benefits and massive cuts on elderly workers. he signed into law welfare reform. he had the biggest capital gains tax cut in the history. but the thing that he really did was he exempted all owner occupied homeowners and taxation and tax cut on that. but just to save the best for last, bill clinton as president of the united states cut government spending every single year for eight years. he cut more than the next four combined the best. to say he raised tax rates because he raised the highest tax bracket that defines, that's not correct.

he was a great, great president and his biggest mistake was offset wonderful things. >> so how would you respond to what they say about tax rates don't matter and states and they don't matter and he says sweden is a huge success story and they have high tax rates and socialist system, what would you response be? >> corporate tax rate. they are the on ones that operation of qe 1 qe 2, qe 3. not part of the eros and all the. i use that as an example for me, if you would. if you look at the whole stuff all your work in those countries had the fastest growth and best

performance is that with low and cut tax rates. two things matter the level of taxes matters. >> i was at an event where you had a meeting and the democrats, a lot of them would support. do you see any democrat. >> if i can take you back, 1970 and 1980. at that time neither republicans and democrats didn't believe. we had wild off one situations and the -- >> that was hanson. >> that was capital gains and i

think there were 90 co-spons and and even regan was step mid on tax cuts to be honest and not i mean carter once you start let me tell you guys who are young once you start with a little tax cut, it worked, oh my god, it worked. it becomes as and jump and cut taxes. this was a congregation of tax cuts with this enormous prosperity of the planet because once this thing starts rolling people, you can't stop it.

it's a hard day. the time has come. these guys have backed themselves into a corner and they can't go any further. now it's our day of once it starts, believe me it's more fun than anything you've done ever. >> so we've been working with larry and steve forbes with some of these presidential candidates to try and we talked about the plan plan, do you think the republican candidates will come with flat taxes? >> i anticipate ted cruz will, sean. i anticipate that even huckabee is talking about, i mean, it's not his primary target area but he's taking about -- oh, yeah, he's talking about a fair tax, which, you know they are all sorts of different ways. >> what about jeb bush? >> i think jeb bush definitely

will. >> you talked with him? >> i said you're the best in the family and he says, listen, for you, watch it. i come from a stand your ground state. [ laughter ] >> jeb bush is one of the finest guys going. really very impressive. we've seen all what scott walker, i mean, this is a field of candidates. if i can honestly say, each and every one of these candidates and i don't know santorum and trump. the others i can assure you each of them has the where with all to be a great president. you know what you're looking at in the presidential race and forgive me you know you think people are born with principles. politics are a group of people who are united by one char aktacter

ris tick they all had bad mommies. you did a great job. no, i didn't. they don't have an internal compass. they don't have a value system so they always look to external affirmation. to confirm their own self-worth. that's why they sit in front of mirrors for days on end. i would guess ronald reagan spent three hours a day, did you see the picture of ronald reagan not perfect? these guys always look how the rest of the world looks at them. you want to find a fun one, go to youtube and look up jon edwards i feel pretty. if you haven't seen that, these guys if a politician gives a speech and everyone boos they change their speech. and what you have here is the perfect defining ground for training grounds of politicians these guys are trying ideas and change their view and the best.

>> the one candidate who hasn't really been saying the tune on the other side of the isle is marco rubio because he does have the this big child tax credit. this isn't -- >> you and i have i don't know about you but i made mistakes in my life and you know, what melton milton freedman always used to yell at me and said arthur, make a mistake. if you make a mistake make it only once. change it and stop making that mistake. and i expect a lot of these candidates will learn that they aren't ph.d.s in economics. you know these candidates are probably -- you know, each of them thinks that he or she is the single best brain that's ever walked the planet earth and they have the correct proposal for every field. but let me tell you, i would not go one-on-one with ben carson on brain surgery.

i just wouldn't. that guy really doesn't know how to do it. so if he suggests brain surgery, i would defer. but when it comes to tax plans, he may not be the right one. these guys are all sitting right there trying to figure out how to get one. they're very successful. the uberous of some of these candidates is they think they can define a tax plan better than what's being done. that will change time and time again and they will become more mature and they will become better and better candidates. that's why we have a primary people. that's why young people finally grow up. oh god did i hate those lines when i was young. but it's true. you know, these guys will learn through the process. each and every one of them has the wherewithal to be a great presence. some of them are enormously

accomplished. if any of you have ever seen ben carson, what he's done, separated conjoined twins and both -- i mean siamese twins? that's amazing. ted cruz, what, has he argued nine cases before the supreme court? hello. he's 12 years old. but marco rubio is young, too. they're allow to make mistakes as they go along and they'll change and they'll get right into the group. >> all right. we have about seven minutes. we have time for maybe two or three questions if anyone has any questions why don't we -- are you going to give folks -- okay. why don't we start with this gentleman here. >> hi. this is tip gosh. this is a question for dr.

laugher. governor walker mentioned the laugher curve both in his speech and in his introduction so if you have any comments on the fact that he mentioned and he talked about broadening the tax base. that was interesting. >> i was going to pay him a lot for doing that until i learned he replaced it with the cold curve. but if you know scott walker, this guy is amazing. wisconsin is a right work state. hello. this guy with stood how many recall eggs and how many elections has he had? just a phenomenal person. he's in the process and each one of these guys has his own thing. i'm just a huge fan of scott walker. >> we met with scott walker. i think he's going to come up with -- on this tax issue, i think he's going to come up with something very big and bold.

i think it will include -- from the facts. but there's no question that scott walker is the real deal. and i think he hasn't come out with a tax plan yet but i think you're going to be happily surprised to see what he comes up with. >> peter. >> all right. i think the 1950s proved that the kind of tax rates that thomas and bernie sanders want can work as long as it's accompanied by an international bombing campaign of all international competitors. >> speaks for itself. >> please, just pull back a little bit. remember, taxes matter and they matter a lot but they're not the only thing that matters. and they really aren't. tariff quotas and restrictions on trade matters monetary policy really matters. when we came into office on january 20th, 1981 the prime

interest rate in this wonderful country of yours was 21.5%. can you imagine what the country would look like today with that? regulations matter. back in the '50s, we had blue laws. there were no discount stores allow. when you look at this, remember it's not just tax. it's all sorts of things together. >> there's a left wing ideology that says it's the intellectual class of the left. and the fact that thomas's book became a best seller tells you a lot about where the left is at in their thinking. and i don't think any of us dan mitchell or myself are going to persuade those people. they have hard core distributionists. but the reason i'm optimistic is that if you talk about the base voters and working class

americans, they do get this, don't you think? they understand if you tax the employer less money for hiring more workers and so on. it seems like we need to do a better job of communicating that message. i don't see the american people at 70% or 80% tax rates. >> no i think you're completely right. and remember, the republican party does not have a leader. as soon as reagan was nominated in 1980, he was the leader and all of everyone lined up behind him. you can't believe the power of once the republicans have a nominee and that nominee is the leader of the conventionist you'll find all these dis-pratt sort of trying to herd cats as they say it they'll all come behind the line and you'll see the republican party speaking with one voice. >> right now, it's hard to discern what's going on in the

republican party with -- how many candidates are there? when the ex governor of virginia is not included in that 18, you've got a lot of candidates. >> hillary i think, has a problem here too. when she gave her speech, which was a week ago today her whole theme was how do we help the middle class? she called them everyday americans. how do we help these people? and she had a big problem. her problem is that the everyday americans shets trying to reach out to have gotten creamed. these are the people that have been the victims of obama's policies. the average family, the middle class who she says she speaks for lost $1,000 of income during the recovery. that has never happened before where you have middle class people declining in a recovery. and one of the themes she'd talks about over and over again

is how do we get businesses reinvesting in america? they've got $1 billion to $2 billion of capital. we need these companies to reinvest. in the same speech she talks about raising the capital gains tax on the people she wants to invest. if you want less of something, you tax it. and it seems like she has a big inconsistency inconsistency. wouldn't you agree? >> yeah. >> one last question and we'll wrap this up. >> thank you. i appreciate you continuing to mentor steve each though he's into his 50s. it's very good of you. >> so much younger. >> i happened to be here in the 1990s when some of this was going on on the hill and it was interesting -- right? >> yes, it reminds me of how -- with the exception of nafta we kind of dragged bill clinton into all of these tax and spending policies with the exception of nafta.

>> not with the exception of fl afta. we did nafta with reagan. we just couldn't get it through. >> right. so if you, in the future want to give this rosy, rearview mirror picture of the bill clinton economy, it would be helpful to at least contrast that with the modern democratic leadership and party and say these folks today aren't for any of these policies of bill clinton where he signs the bills on spending cuts and tax cuts. >> forgive me if i can. you're right, you're completely correct. but in 1979 1980 there wasn't a [ expletive ] democrat alive that wasn't for it either. they're jokes now, but they weren't funny back then. they were the exact same as reed pelosi and obama. you know when you look at today, don't think that those kms cannot become us.

they can. they will. they don't need a clothespin. we need to accept them into our fold and once they get in they'll do what al gourd said to me it's the best vote ever. go read what those guys wrote in that time and in that place and in that situation, what they said this would do. it makes steve and me la like left wingers. >> the reason hillary's speech was important last week is she basically said if you elect me you're not going to get a third bill clinton term you're going to get a third barack obama term. and i don't think the american people want a third obama term. the party is shifting extremely to the left which i think is discouraging.

it's so disoccurringage and that makes it all the more important that we get these guys on the republican side of the aisle to embrace this idea. and i think just in closing -- i see you're hyperventilating there. the fact that you've got 18 republican candidates out there for president and 15 of them or so are talking about these ideas, that's a real break through because we have problems getting republicans in favor of these ideas. >> very much true. but what i'm asking stay open to democrats. work with them. bring them on board. it's all of our country, not just one party's country. mrooz, please, please educate them work with them. every now and then they may have something to teach us. please, it's one country, one people, one vision one future. please be that way.

>> thank you very much. >> thank you, steve, very much. >> thanks again to steven r. and thanks to everybody for coming. before we close, we're going to have another tax event later this fall, probably in october, so stay tuned to that announcement. and i think there might be some