previous question, which is -- i would phrase it differently and go back to something that was said this morning and go back to some history and that is i think there is broad-based consensus in this country that people would vote for essentially low are rates and get rid of basically a lot of loopholes, all right? both conservatives and liberals would agree to this. and i can tell you i used to be a research assist tant for joe peckham, he was a die hard democrat, he spent his entire life, he was a legal tax expert in the united states before he died arguing exactly this. he lived long enough to see bill bradley make a deal with ronald reagan in 1986 and we have since gone backward completely since 1986 and junked up the tax code with all these loopholes. and so i think -- i don't know what the optimum rate is but i can tell you the optimal design

and that's the reagan 1986 tax cut. i don't know what the right number is, 28 or 30, i personally think the right number on the top rate may have to be a little higher than we were in '86 because we have an aging baby boom generation and we have huge entitlement obligations, rising health care costs that i don't think are going to be easily constrained. so i'd be willing to take a little higher rate, but the basic principle -- i think it's doable. >> i think you're exactly, exactly right with that, another profound point. you're winning on points on this panel, bob. >> by accident. >> heavy competition. >> the effect that this unevenly applied tax rate, how demoralizing it is to small business people, the large globally effacing publicly

trading american companies are doing well right now, it reflected in stock market val s values, they pay effective tax rates that are much lower than the nominal rate, google paid 4% and the average -- the small business owner that paul ryan referred to looks at this and feels completely piled on and demoralized and i think the demoralized small business sector is robbing gdp of 2% per year. >> i remember designing -- everybody that worked on the hill for the last 30 years probably at some point worked around a flat tax. but for connie mack we worked on a flat tax. the question was whether we were going to keep the mortgage interest deduction in there.

i swear we had a secret meeting and somehow the next day all the lobbyists for housing showed up. i don't know how they heard about it. it took them less than 24 hours and they were there. with mortgage rates so low today, i believe it's a perfect opportunity to get rid of this thing. and i even think we are starting to hear some noise behind the scenes that even the realtors and the home builders are willing to talk about it today. we've never had a better opportunity. and if rates go up, we might lose that opportunity. the second thing is the growth -- growth is being undermined today. lots of people talk about uncertainty and i have no doubt that uncertainty about future taxes, the cliff that's coming next january matter a great deal. but i think bad policy is harming growth even more than the uncertainty about bad policy in the future. spending is too high,

regulations are too high, taxes are in good shape, reasonably good shape today but it's the spending that's killing us. and the bigger the government is, the smaller the private sector is, the smaller the private sector is, the less dynamic the economy is, the higher unemployment will be. europe shows us that over the last 30 years, we're living that today. we have one, bad policy, two the impact that bad policy has about creating uncertainty about future tax rates, et cetera. >> i'd like to open it up for audience questions, particularly if you disagree with any of the panelists on oil, energy taxes or transaction taxes. we'll start here. i think we'll get you a mic, yeah. is it the protocol to state who you are? >> my name is ashley, i live in new york city. i'm a turkish american p.

i wasn't to react to your question about why the smart and accomplished silicon valley entrepreneurs seem to advocate the type of policy that are wrong for the country. i'm not an expert on this but i can think of three reasons why. one, they're not dealing with you in silicon valley, there are none. they don't understand the type of decisions that bowing is trying to make. that's number one i can think of. number two is those guys become balan billionaires and millionaires but they're making their millions on capital gains. the third thing the technology sector and particularly the internet relative -- i've spent nine years doing investment banking, are relative to the financial services sector, my deregulation. they live in a different world

and don't live in the world we live doing banking in new york city paying 35% of taxes. you know the drill. thank you. >> very good. and literally silicon valley is creating wealth but it's not adding net jobs because all the manufacturing jobs have left a long time ago. >> but they are paying high state california taxes. >> and, you know, that's another proof how fast growth works, right? they're growing so fast they don't even have time to think about what policies are really working. >> one over here. >> okay. >> who first? >> okay. >> scott hodge with the tax foundation. i'll ask you the question that's been burning up my blackberry for the last hour. the buffett rule. how might the buffett rule, should it be implemented, affect

capital market, capital gains, realizatio realizations, economics, et cetera? >> brian? >> i mean, if i understand this correctly, what we're really talking about is -- i think there's two parts that i've always heard of, minimum tax kind of thing and also it's sort of a carried interest issue. and it would affect all private equity, all venture capital and i think it would undermine growth dramatically. in addition, it doesn't raise as much revenue as people think because of exactly the reasons we talked about -- not that i talked about but that bob and cameron talked about with the transaction tax. so did you do -- scott, did you do a study on how much it might raise and i think it was you -- >> i think we were somewhere around $40 billion, which is about what the joint committee came in on.

so it not a whole lot of money for a lot of pain. >> it's a lot of pain. here's the deal. i mean, we all know this, it's all based on misinformation. because it's not true that warren buffett's assets and persons, if you think of him and all his assets in person pay less in taxes than his secretary. it's just not true. those corporations pay a 35% tax rate on all money that they earn in the united states and if he's not paying it in the united states, then that's a reason to go to territorial tax system rather than the one that we have. it just based on a fallacy. any kind of law i think based on a fallacy is -- two wrongs doesn't make a right, if you will. and so, i mean, i haven't followed -- i know what the -- anyway. >> one of the interesting aspects of the joint committee on taxation analysis, however,

was the admission on their part that it would have tremendous barrel earlier effects. i wanted to get into for people who are in the market and really understand it a lot better than we do from washington. >> i have two points. first is it not just a tax on carried interest as people talked before, it a tax on capital gains by a significant number of market participants who are going to have to pay higher capital gains. if you think higher capital gains rate are bad, well then ipso facto you're going to have a negative impact. i have larger point that i don't understand, i know the answer to. is i know why democrats, being a democrat, i understand why democrats are making a fairness argument, all right? huge rise in inequality. if you look at the public opinion pole, thel, there are af people very upset about it. you know why ostensibly president obama is arguing a higher rate. but if they went to a reagan

style clean tax, lower tax rate down to 28 % or 30% with a lot fewer deductions -- i don't think we can get rid of all deductions. i like the simpson-bowles compromise which put a percentage of income cap on all deductions. if you went to that kind of tax system as a practical matter the rich would pay more. i don't understand why democrats, who are so intent on trying to sock it to the rich, why don't they go with something like simpson-bowles which on net it will correct our fair share problem but at the same time it has up better incentive effects. it has much lower rate, screws up small business less and it get what we want, get what republicans want and i don't understand why they don't go for that. >> do you tax cutting democrats, do you ande erskine hold your

meetings in a phone booth? >> democrats actually don't want to tax the wealthy more. they just want their constituency to think they're taxing the wealthy more. >> right. i understand that. it easier with a higher rate -- >> if there are write-offs the rich don't pay, they don't care. i'm having a bit of a struggle, i found this an incredibly, sighting day. the government set it off with saying we had to get our financial house in order and then we looked at pro -- candidly, anyone in public life would understand that. how do you ask for a tax cut when you're starting to cut programs? the second thing that i wrestle with -- i don't want to use the word wrestle. the second thing i have a challenge with is suddenly austerity has a bad word to it. i found myself con tem tuous of the greeks not wanting to suck

it in. hello, get real. i think you got to tell the american people the truth, i think they empower you to do the right thing. why are we making austerity seem like a terrible thing? if you're at 24 freaking% of gdp spending, you need a little austerity. >> anyone want to jump in on that? >> spending cut are pro growth, especially when you're talking about 24% of gdp, there's no doubt. spending cut would actually bring in more revenue because the economy would do better. and that's -- the canesians have won the day with the mainstream media and many members of congress, that's unfortunate. you know, so i would agree with that 100%. >> in terms of the buffett rule, one of the things, not from an economic standpoint because i'm not an economist, that's for

sure but from what we're seeing trading globally and lots of asset classes, i think it add to the uncertainty. we're seeing trading volumes down, u.s. equities, asia, treasuries, bonds, everything. we're just assuming that there's this uncertainty out there and no one's doing anything. it doesn't matter what the asset class is or what the geography. just the hostility to the rich i think just adds to that environment as well. it's not going to do anything for growth. >> and cameron, one of the other things is that if you think about a capital gains tax and, bob, you're right to say it's just that because it's on all income, but it's a wall between the old and the new. so the higher the cost of it for me to get out of my original investment to re -- to put it into a new investment, the higher that cost is, the less i'm willing to do that. and warren buffett hardly ever sells anything so maybe he

doesn't even care about that. so for somebody who is helping to invent microsoft and taking that money and moving it into facebook, it matters a great deal. and it limits the amount of resources that can actually be moved from the old to the new. >> starting with you, bud, i'd like to go down the line and give your optimal tax program for 4% growth. the top income tax rate, the number of brackets and the capital gains rate. let's get it all out on the record here. >> that's not really what i do. >> the optimum tax rate for bringing oil out of the ground. >> well, let me put it this way. in addition to the debate and uncertainty over taxes and budgets and politics and regulation, we've got so much uncertainty out there.

we have uncertainty about uncertainty. and i think that has ban tremendous retardant to a robust economic recovery. rather than singling out a particular rate, i think what we need in tax policy is some degree of certainty and predictability. i mean, it's like if the average tax rate is 30%, businesses will eventually -- will adjust. if it's 50% businesses and people will adjust. i think first we got to have a consensus and have some certainty. and the final point i'd make and i was just thinking as we were sit hearing, my mentor at columbia university 40 years ago, d. lowell harris, he used to say, remember, businesses don't pay taxes, only people pay taxes. and we need to keep that in mind, whether we're talking about the individual tax rate or capital gains or death taxes or corporate taxes.

>> your point about uncertainty is a very good one. brian, where would you peg these numbers? >> i mean, it all depends on where you start the taxes. i've always been an advocate of a flat tax but let me take this opportunity just to talk about a nationwide sales tax or value-added tax. if i were going to design a country from the ground up, if you gave me an island and said you're going to start a country, would i put a sales tax in because it's a -- you only pay it when you spend. if you're a bus boy at a restaurant, can you live in a box in the alley and eat all your meals at the restaurant and never pay a dime in taxes until you save enough to open your own restaurant. can you do that. it's your god given right to live exactly like that. with an income tax, you don't have the choice. so what i'm saying is that if i were going to do that -- the problem is we've started with an

income tax in 1913. if i were to take away the income tax today and put in a sales tax, all these people that have saved after tax to spend in their retirement will actually be taxed twice. they'll be taxed as they saved it and then they'll be taxed as they spent it. that makes it unfair to switch in mid stream. and so i'm -- the perfect tax you can only be instituted if i were to start a country up brand new. so that leads me to -- >> you guys are just both wonderfully evasive here. >> i would do a flat income tax of about 20% with no deductions whatsoever for anything and i would pay that tax on income, not on capital gains, not on difficult depends, not on interest. it depends where you kicked it in, chris. if i started at $10,000 per

family, yes, i could probably guarantee it. if i started at 30 - -- >> if you said 20% but including capital gains and dividends and so everybody's in on it, we just stick it at 20, if we -- >> we'd have to -- >> we're going to get 20 anyway. >> we'd have to reduce the corporate tax rate to the same rate. >> 20 across the board would be the most politically sellable? >> probably. >> i have a variation. i could go with 20 but i'm still in favor of a lower bracket for lower income. i have one additional qualification. i haven't run the numbers but let's say that raises about as much money as we have now. it's not going to be enough to still deal with the aging baby boomers. so have i been attracted to the notion which has been advanced

by john shownen of stanford, i'm reading a book by bruce bartlett and that's time medicare financing to a sales tax. it would automatically discipline or at least have some discipline on medicare spending and it would be a way to finance medicare spending. i don't know where that wouldnd up as a percentage of gdp, i would sleep safer at night we were going to finally deal with this deficit and -- >> a revolution in health care -- today you can get your dna sequenced for less than $500. if you're so brave, can you put that up on a social network and have really smart people run algorithms against it and give you a prediction of where you're most likely encounter disease.

the amount of money in silicon valley -- what i'm seeing is health and at the seed level right now is health infomatics will have a dramatic effect. that's a thought but i thought i would throw that out there. >> ellen cough man is coming out with a report on just that. >> cameron and bob, if you were the czar, where would you -- >> this is a forbes conference. steve forbes isn't here now, i have to go with the flat tax and 20% like brian. it's simple and get it done. >> would you apply it to capital gains? >> across the board. >> probably the most productive thing to be capital gains is zero but in terms of getting it passed, you'd probably have to go across the board. don. >> i'm an expert knowing if you keep spending more than you're making, you eventually go broke. and i would be one that would

say look, we're going to cap the spending. we're going to move toward capping the spending of government of 20% of gdp. the idea that we're at 24 going to 25, 26, 27, that leads toward bankruptcy. so i would put the cap on spending at 20%. you'd have to have a glide path to get there and whatever kind of tax policy wols generate the 18 or 19% and the most productive way is what i would be in favor of. i mean, you know, you hear lower the tax and broaden the tax base and you know, lower taxes, broader base makes sense to me. but let's get the spending under role. the idea that we're going to kind of move toward 26, 27,% of gdp is disastrous for the country. >> well, i mean, you're quick with math. if we had 20% flat taxes starting with a base of a $14 trillion economy and assuming 4% growth with 20% taxes across the

board to the congressman's question, what do you think that would do to government receipts? >> they would explode upward. 4% growth compared to 2% growth, i mean do the math. the revenue potential, it would be like the '80s where yes, i would agree with larry lindsay that the reagan tax cut in a whole cost revenues, you know, relative to the path that we would have been on initially. but it grew the economy so much that by the late 1980s, early 1900s, we had more revenue and more gdp than we would have had under the other tax code. >> thank you panelists. i would conclude by saying there's not a rob in the united states that gets better with 2% growth and 4% growth, you can begin to solve some of these deeper social problems. thank you very much, panelists. >> thank you, rich.

>> now to a panel on tax policy solutions that can bring been economic growth. the buffett rule, a plan proposed by president obama to reduce income tax inequality is discussed extensively. former presidential candidate steve forbes and kansas governor sam brownback are among the panelists. this is about an hour. please take your seats. and actually, if you can, try to move into the middle. it's much more fun. now, i'm going to -- i'm going to introduce everyone just standing up here.

i want to remind everyone than after this, our final panel be finished, we will have a reception outside. with more of those delicious cookies and other things, and sponsored by the u.s. chamber of commerce. so one, two, three, four, five, six, seven eight, including me it's nine. this is like the supreme court, right? can we decide anything here? there's still some very important decisions to be made. i'm going to stand here and introduce everybody and then sit down. let's see. who's at the end, john stossel, host of stossel on fox business network and john has a new book called "no, they can't." published today, the publication date is today. and we're very lucky that he's here.

[ applause ] and next to him is my dear friend and former colleague, kevin has set, the director of economic policy studies andster fellow at the american enterprise institute. hold your applause. and let's see. next to him, is that alan? yes, allan swartz, executive chairman of guggenheim partners llc. next to him is john taylor at the hoover institute and raymond professor of economics at stanford university, also has a new book relatively new book "five principles," correct? and then steve forbes whom you heard from earlier today, the chairman and editor-in-chief of forbes media. eddie lazear, the jack steel

parker professor of human resources management and economics and he's also the morris around cox senior fellow at the hoover institution, and he is a member of the george w. bush institute advisory board. and next to him is governor sam brownback of the great state of kansas. and next to him is larry lindsay, whom you've already heard from today who is president and chief executive officer of the lipped say group. now i'm going to kind of move down here. so this session has been called by amity who is our -- actually, i sort of figure, this is amity's world, we all just live in it. so amity, we call it blitz solutions, right, amity? so i've been asked to start this

off by going around or down and asking everyone, what is the one quick, and i mean quick like 20, 30 seconds, don't worry we'll have plenty of time to talk about things that they would f offer as a tax policy solution to help us get to 4% sustainable real growth. so i'm not going to start with john stossel. i'm going to start with larry lindsay. larry? >> 20 seconds. abandon income based taxation, move to business cash flow taxation with border adjustability. it's called a vat. you're not allowed to say that word. >> okay. we're going to come back to that because that's very interesting for -- very interesting subject matter. governor brownback? >> a flat tax with a small business accelerator where you

take the tax totally off of your sub ss or llcs and llcs. so you really get your acceleration, like shooting adrenaline into the heart of growing the economy by taking that tax off of small business where most of your job creation is. >> so you'd have no tax for small business. >> yeah, and a flat tax otherwise. >> do you mind giving us also a state tax blitz solution? >> that's what i'm proposing. >> so you're saying not federal level but state level. >> i'd say both. this is what we're doing in our state, flat tax, step one. small business accelerator inside it, take the tax completely off of sub ss and llcs because that's your main growth fledged and then i want to use in our state the growth to ride the income tax right down top zero. so you create a real growth atmosphere in our state and that's the plan we've put forward. war getting into the end of the legislative session. testimony we've gotten a variant

of it through both houses and we've got to the see it on through to the end. but on the economic modeling of it for our state, it looks really nice on growth, particularly the growth piece is taking that tax off of small business and really targeting that piece of the growth instrument. >> eddie, i introduced you and neglected to say you're the former chairman of the council of economic advisers. so eddie? >> well, i would start with a coup of principles. first we want taxes to be low, we want them to be efficient. and we want them to be neutral, which means they don't favor any particular sector. they don't favor any particular financing. and they don't favor any particular program like health care through the employers. so what that points to is a consumption tax of some form and in particular, what it means is zero taxation of investment, zero taxation of investment is the key here. there are a number of ways to get there. the way i like best, the easiest way to get there would be to allow full and immediate