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

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

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

testimonying me that i'm supporting a tax bill that is going to create a 23% consumption tax. but the reason we do that is because that's what it costs to fund the united states government as it exists today. fair tax is not about shrinking the size of government. it's a bill about fixing our tax code so we can grow the size the economy. 23 cents is what that marker is. we're the only ones who are honest with folks about what that number is. if it's too low, let's raise it. be honest with folks about raising it. if it's too high, let's lower it. but we can be honest with folks about what the size and scope of government is. second thing the fair tax does that absolutely no other tax proposal proposes to do is it eliminates the payroll tax. the payroll tax. when i go into high schools and talk with senior classes, they will talk about their part-time jobs. they know all about taxes now. didn't know about taxes before they took on that part-time job. but know all about taxes now. the one they want to know about

is that one called fica. what are they getting for that? i don't know if you have looked at the numbers, but payroll tax is the largest tax that 80% of american families pay. think about that. how much thanksgiving and christmas dinners are interrupted over the next 60 days with talk, dare i say arguments, about income taxes? griping about income taxes, frustration about income taxes. i can't tell you how many there will be. but there will not be one conversation about the payroll tax even though that's the largest tax that 80% of americans pay. if you want to get the tax man off of the american entrepreneur's back, off the american family's back, if you want to create that thirst for production that i think is inherent in the american psyche, you have to eliminate the largest tax that 80% of americans pay and that is that payroll tax. people often think about sales

taxes as being regressive. it's the only proposal in all of washington, d.c. that proposes to eliminate that tax burden that is the highest tax burden for 80% of american families. we have tried the income tax route. this show the top rate going back to the kennedy administration. of course, john kennedy was the original tax cutter. he cut that rate from 91% down to 70%. but he didn't bring in any more money. across the top of this i graphed marginal tax rates. the bottom, i have graphed individual tax receipts. i need to give credit where credit is due. heritage foundation graphed this chart. they put out a group of economic charts to help people to understand the impact of washington's decisions on our economy, on our families, on our businesses. this comes from their collection. what you see here is that it does not matter how high or how

low the income tax rate is, america is only willing to give you so much. the largest change in individual income tax receipts came during the clinton administration. not because the tax rate changed at all during the clinton administration but because the economy was on fire during those years in the '90s. if folks are making more money, they are spending more money, they are paying more taxes. the secret to bringing in more revenue is a bigger economy, not a higher tax rate. the fair tax defines that, exemplifies that in ways that so many other programs miss. i take you back to 1997, the midst of this giant economic explosion, the joint tax committee had a symposium on how to you model a consumption tax. it's hard for me to get the fair tax scored because it's not just nibbling around the edges. it's completely different than we have ever done before.

so joint tax committee brought in economic analysts of from the left and from the right all across the political spectrum, eight different macro economic groups and tell us how you would model a switch in america to the consumption tax like the fair tax. they all came back with different up ins as you would imagine. but the one thing these eight different analytical groups agreed on is that the american economy would grow faster until a consumption tax than under the current tax system. the liberals thought it would grow faster. the conservatives thought it would grow faster. the area of agreement is, we can do better in the panthway. and it has to do with getting us out of marginal tax rates. it is getting us out of tax expenditures. what's the biggest challenge of getting the fair tax passed in washington?

really smart people. biggest problem is all the people who are really smart in washington, d.c. if you are really smart, you have got an idea about how we can use the tax code to make somebody else's life better. you do. you think, look deep into your heart. everyone in this room has an idea about how if only we manipulated the tax code in this way or that way, we could affect the behavior of america and that would make america better. top tax expenditures in the budget, employer provided healthcare, home mortgage reduction, preferential rates for dividends and capital gains, down to medicare, exclusion for pension and earned income tax credit. the fair tax goes to zero tax expenditures. zero exceptions. zero exceptions. if you don't turn the whole system on its head, it's hard to change the association that folks have with these tax expenditures and their quality of life. when milton freedman was asked

when he was testifies before george bush's tax advisory commission, they said what would bet easiest way to make sure that we don't have a new tax code littered with all of these deductions and exemptions? he said, start out with a tax code that has none. start out with a tax code that has absolutely no exceptions, deductions, exemptions. because if there's a good run to put one, i can make a good case to put in two and then three and then four and then five and isn't that the way we arrived at income tax that we have today? i don't dispute that there's value in each one of these tax expenditures. what i dispute is that the tax code is the best place to implement social policy. social policy is the best play to implement social policy. fair tax, no deductions, no exemptions.

folks pay that fair tax on absolutely every new good or service that they buy. eliminating the distortions from the economy, huge, huge difference in terms of utilization of capital. this one is titled america the self-destructive. it's put together by the tax foundation. it ranks tax foundation, it ranks folks by tax competitiveness. our friends in estonia are number one on the list. united states is down at 32. i don't believe there's a worker in the world that works harder than the american worker. i don't believe there's an in a infrastructure in the world that's better than america's. i don't think there's a people on the planet more committed to economic success and they drive that one family, one worker, one entrepreneur at the time. i don't think there's anyone who does that better than we do. but we have handicapped ourselves. the fair tax aims to wipe that slate clean. if you have been in this town

for a little while, you have watched the mac nations of trying to get a rebatable tax code to the american border. many would say, we sort that out in the price of currency. it's not that big a deal. it's a big enough deal that most countries in the world are focused on succeeding at it. how do we keep our tax consequences from burdening the price of goods that we're shipping overseas? those countries that use vat tax and the goods come here tax free. for us we have no such alternative. the fair tax solves that issue. doesn't just remove income taxes from the price of production but removes payroll taxes from the price of production as well. again, having an honest conversation about what the size and scope of the government is and how much that costs the american consumer. i go back to that chart that we looked at on the top marginal tax rates and individual income

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

what happens -- i should have intuitively -- what happens is, when things are going well, all of those smart people i told you about have lots of places they would like to spend all the extra money that's coming in. good places. spend it on children and day care. spend it on children and education. spend it on children and higher education. spend it on workers and retraining the list goes on and on and on. things that you and i would contribute to out of our own pocket because they are worthy causes. so when the economy is going like gangbusters, we are bringing in money and the federal treasury and the only people who pay taxes are people with a job, federal receipts get bigger. when the cycle comes and those receipts shrink because paychecks shrink and jobs shrink, we have now become accustom to a new level of spending. and we borrow the spread. until we get back into another

cycle where we -- where our amplitude of tax receipts goes higher and we spend even more money. the amplitude of volatility, of income taxes compared to sales taxes is night and day. the enemy of the federal budgeting process isn't that we don't have enough money one year, it's that we have much, much too much the next. smoothing out that volatility, having a more predictable revenue stream makes all the difference in federal budgeting policy. fair tax, consumption taxes provide that certainty in ways that income taxes never can. again, you are making my day bet are by letting me talk about federal tax policy, particularly federal fair tax policy. had we been talking about federal income tax policy, it

would have made my day worse. i'm here with three of the finest minds you could have on this topic. david was one of the first folks i met when i came to capitol hill. has forgotten more about the mac nations of tax solutions than i will ever know. todd has been leading a group that knows that you change -- you make big changes from the grass-roots up and has been involving folks back home and around the country in making decisions and making a difference for as long as i have known him. and karen, doing the predickive work, i dare say not the glamourous work of the fair tax, grinding through numbers and putting it in terms that the rest of us can understand makes all the difference in the world for the cause. i'm grateful to her for it. to be clear, i'm the guy who introduces the fair tax on

capitol hill. i'm the guy who adds the new co-sponsors to the tax on capitol hill. it's the grass-roots organization across the country that is going to pass the fair tax on capitol hill. and every time you see a new member of congress who has added their name as a co-sponsor, you know it was not because of my power of persuasion, not my charisma but because a group of constituents back home said, you know what, there's a better way and it's called the fair tax. let me work with you to get it done. and as david said, we now have more courageous co-sponsors than any other fundamental tax reform bill on capitol hill. and it matters. anything on anybody's mind ss? >> anybo questions? please state your name and institutional affiliation. >> laura truman with the heritage foundation. i wanted to ask about the impact

on social security. one of the things maybe the average joe on the street doesn't know, social security is in trouble. but those of us who watch numbers by having a designated trust fund and a designated tax, we can see the imbalance. but if you get rid of the payroll tax and you fund it out of general taxes, then some of that sense of it gobbling up all the tax income or having a shortfall goes away. how do you handle that? >> laura, you will remember president bush chose in his second term, was going to take on tax or social security reform? he chose social security reform. it was difficult. not much folks could tell you what progress was made. we didn't want to take on both at the same time time. both of them are critical and both need to be taken on. we try to take on tax policy and leave the social policy of

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

easy things, the hanging fruit that we could do in the next two years, passing tax refofrm requires a president who believes in tax reform. i hope we can have that. but we know what it takes to solve the social security problem. you have to do something with benefits or you have to do something with revenue. and my great hope is that we will take some of the early steps to solve that issue in these next two years, which makes then tieing the fair tax into the two even easier. most folks don't understand the progressive nature of social security payments. if young people today are saying they are more likely to see a ufa thuf u ufa than a social security check, then the time to talk about it is now. >> next question. >> dick farmer, retired citizen.

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

isn't letting get up. when i'm ea high-income earner,i can adjust it. which is why when the top tax rate is 90%, americans weren't paying more than they were when the top tax rate was 28%. low income earnings don't have any choices. all they can do is go to work for a paycheck every day. eliminating the payroll tax changes the distributional analysis for them in ways that no other proposal does. when president bush's advisory panel was looking, they released their preliminary july 2005 report and found that no proposal they were examining did more for low income americans than did the fair tax. i can't guarantee what your -- what taxes you will pay under the fair tax. what i can guarantee is you will have control over those taxes. by taxing you on what you

consume rather than on what you produce, it brings your relationship as a funder into a much more controlled -- we will discourage consumption but not production, which is what we need not just from folks at the top but from the bottom of the income spectrum as well. it will change the tables but it will put the outcome of those into individual consumers' hands. >> this gentleman. >> local ly, how does -- how wil the fair tax deal with lotteries? >> it's my least favorite part of the fair tax. but it's called the prebate. i want you to think what happens at the tax writing committee.

i don't want to tax people for diapers they are buying for their children because that's important. i don't want to tax folks on food that they are buying. hate to tax people on prescription drugs and not -- the calculator for school. the list goes on and on. if we let ourselves get into that cycle as so many states do of what is worthy to be taxed and not. if you buy 12 doughnuts, you get tach t taxed. if you buy 13, you don't get taxed. we don't want to be in that business. we take a look at the federal poverty line as created by health and human services, based on family size, and said, listen, nobody should have to pay taxes on the purchase of those essential goods defined in the poverty line. so we will just give folks a rebate. we will give it to them early. of the taxes they would pay on all of those goods up to the

poverty level. because we do that for every american, we don't have to fine out how much money you make, we don't find out where you make it, we don't track you down. think about this. the only relationship you will have as an individual american citizen with the federal government as it pertains to taxes is filing your postcard that says this is my name and this is how much children i have and here are our social security numbers. that's it. that's it. the involvement of the american tax man in the american consumer's life is over forever. and you can only do that if you find a one-size-fits-all kind of process to deal with exemptions. it's based on family size. >> any other questions? hearing none. i will take that as a wide acclamation and endorsement of everyone in the room for the

fair tax. i will carry that to the capitol and see what we can do. you have made my monday better by coming over and talking about good news. >> thank you very much for coming. >> thanks, once again, to the congressman. we will now have our two panel guests. i will quickly introduce them and then hand it over to them. our first will be tom mccracken, president of the national small business association, which is the oldest and second largest small business advocacy group in the united states. he became president in 1997 and previously he -- he joined the association in 1988, previously

serving as vice president of government affairs. he testified before congress on numerous occasions, appeared on television shows and published in most of the leading newspapers in the country. he is a native of new mexico and he received his p b.a. in economics from trinity university. dr. karen wallby is from americans for tax representation. she has 20 years of experience in federal and state tax policy analysis. having worked in that capacity for three florida governors, two democrats and one republican. she's worked for the taxation and budget reform commission of the florida legislature and worked in the private sector and as director of research for florida tax watch. she has also served as a professor at florida state

university. join me in welcoming todd mccracken. you can stay there or come up here. >> i'm using slides. i will go over there. you are welcome to sit. >> thank you, david. it's very good to be here today. i appreciate the opportunity to talk about the fair tax. it's a topic that we need to talk about more. because it clearly is the best system of taxation we believe for not just americans overall but specifically for the small businesses that we represent. we have been advocates of the fair tax now for a number of years. i think we were the first groups to endorse the tax. and it is because the small business community is -- faces virtually every aspect of our tax system that i think we have been so committed to it. stop and think about it. if you own a business, you are one of the few people in the country that faces -- have to pay personal income tax,

business taxes, local taxes, payroll taxes. not only do you pay all those taxes, and i can list more, but you have to administer the tax system. you have to withhold from employees. you have to deal with sales taxes for the states and localities if you do that. so small businesses are the only ones faced the full brunt of everything our tax system has to offer. i would like to point out that as much as our members hate paying taxes and think they pay too much in taxes, when you ask them what the biggest burden of the tax system is, they tell you it is the administration of the taxes. the complexity and the burden and the time that are required of them week in and week out to deal with the income tax and payroll tax system and the state tax system and the excise tax system that we have in the country today. you think about it from the current system we have, especially the income tax, but also the payroll tax.

it diskour ran discourages entr virtually every level. most every entrepreneur, unless they sell tax shelters, see our system as punishing present sure. it faces significant tax obstacles. startup costs are not deductible. when the income is earned and when the assets that generate that income stream is sold, they are taxed. the government takes income as more money is made. they are taxed when exporting because u.s. taxes raise the price of goods relative to foreign goods. they are taxed when they add jobs because our high payroll taxes increase the cost of hiring. family businesses are discouraged because they are taxed when they are sold. finally, the owner gets to meet the undertaker and irs on the same day as the government affects a leveraged buy outof

the business. the payroll tax burden is one of the things that really attracted us to the fair tax. payroll tax burden that small businesses face is enormous. it adds greatly to their cost of employment. most workers, while they see the fica tax that the congressman alluded to in his talk on their paycheck, they don't see the other half of that bill that employers have to pay. that works to depress their wages but also to the extent it doesn't increase the wages that the employers have to pay. the other thing that we have to think about from the small businesses is they are the primary source of fines. they have to remit payroll taxes on behalf of the employees anthem service. there's a mistake or error, which they do this every two weeks, they wind up with a

letter, a fine, a notice from the irs that they have to deal with. it's both money out of the pocket of those small businesses but also enormous amount of time that they have to deal with. the other, of course, aspect of the system is the unnecessary complexity that we deal with in our system. small business community pays the lion's share of the overall compliance costs of our tax system. which are in the hundreds of billions of dollars every year that are paid in order to administer the tax system to hire the cpas, to have work that is not getting done in the business. so to think about essentially removing those hundreds of billions of dollars is extreme ly attractive to the small business community. so we think to deal with these

problems, this is the best system. it has enormous simplicity in compliance costs. the -- businesses are the only entities who have to deal with the fair tax on a compliance and administrative basis. the only they would have at the end of the year, how much did you sell to consumers. calculate the tax, send it in. you are done. that's all there is to it compared to the layers i described for you here today. for most of the those companies that are administering the sales tax, they are already administering a sales tax in the state. so is the type of administration wouldn't be fundamentally different from what they are already having to do right now. the other main benefit is the visibility understanding that congressman woodall described. the cost of the government will be right there in front of everyone to see on every

purchase they make every day. so i actually think that's one of the ways that it would point out the ever growing and increasing cost of our entitlement system is that every time those costs went up, the sales tax would go up. people would ultimately know why. economic growth, of course. small companies would be unshackled from this system. it would be easier to start a company, grow a company. it would be greater rewards for growing a company. all that was would inevitably lead to greater economic growth and the need for less -- less of a need for higher tax rate. it would, as the congressman said, it would improve our international trade position. the other issue i would like to raise, people ask me, as an advocate for small companies, why are you for the fair tax? small businesses would have to deal with the tax system. why don't you feel -- especially

retailers, why is this good for retailers? i point out that every retailer -- virtually every retailer has to deal with a sales tax today. but they also have to deal with income taxes, payroll taxes and all of the rest of the plethora of things that i have mentioned. we have the fair tax all of that goes away for the retailers. the only thing they deal with is the sales tax. while yes they may be more burdened by administration of tax code than the typical consumer, vastly less burdened than they are by the system we have today. for all of those reasons and i would say many, many more that i could get into if we had all the time in the world this afternoon, which we don't, we have been strong advocates of the fair tax and hope that the congressman has good efforts, good luck today in his efforts to convince his colleagues to get on board. with that, i will end and take questions. thank you. >> karen.

>> hello. congressman woodall and todd have done a good job, i think, of laying down the basics of the fair tax. what i'm going to focus on is the economics of it. and i'm going to do that with graphics rather than a lot of dull economics terminology. hopefully, you will think that. so the first thing that we need to look at with the fair tax is what is the base of the fair tax? it's a consumption tax, destination principle. it's neutral between savings and consumption. it's neutral among types of investment. neutral between capital and labor. and i forgot to do my slides. where is the -- oh.

there we go. neutral between foreign produced and u.s. produced goods. and it is broader than the -- it has a broader base than the current system. that's significant because broader bases -- a broader base allows for lower rates. lower rates allow for less distortion in the economic system and promote higher growth. all right. congressman woodall was talking about the consumption base. and how it's a more stable base than the income tax base. so what this graph shows is a comparison between agi there, adjusted gross income, and pce,

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

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

revenues and let's see that we can fund all these things with that. and then when you hit the next recession, you have a level of spending that you can't sustain. and then you get into -- where we are now, borrowing what -- 40% of what where he spending, something close to that range. the point -- the thing i want you to observe from this though is that the red line is the income tax base changed from year to year. you can see that the ups and downs are much more variable than they are for the personal consumption expenditures curve. actually, adjusted gross income goes as low as negative 7% growth in 2009. in that year, it was a bad year. that year, consumption went down

less than 2%. so that is another reason why the consumption would be a better tax base. how does the fair tax boost economic growth? the broader base allows for lower marginal rates and lower marginal rates result in greater work savings and investment and those in turn result in higher productivity and lower costs which then result in increasing jobs and wages. so it does benefit -- the benefit does go to the worker. it levels the international playing field. it treats u.s. businesses and foreign business activity the same. it would bring corporate

headquarters to the u.s. or keep them here, the ones that are staying. we heard about corporate headquarters leaving because of the very high corporate tax rate in the u.s. but also, attract production, because the system is border adjusted. the taxes from the producing company -- country are taken out. so all in all, it will result in the most attractive investment climate in the world if we implemented this system with a zero tax base -- i mean, a zero corporate rate and a territorial system and equal treatment

between foreign produced goods and u.s. produced goods. here is a table that summarizs s how strongly disadvantaged the u.s. production is. in the red you see that for goods sold in the u.s. market, they pay both income and pay rof taxes are in the cost of american goods sold in the u.s. foreign goods sold in the u.s. don't have that burden in their cost. so it gives them a definite price advantage. it has been estimated as much as around 18%. goods sold in foreign markets, we don't have a -- what's called a border adjustable tax system. so when u.s. goods are sold in foreign countries, they still have the burden of the income

tax and payroll cost includes in the good and makes them non-competitive overseas. when you go to the fair tax, it levels the playing field. you can see in american goods sold in the u.s., they pay the fair tax. foreign goods sold in the u.s., they pay the fair tax. american goods sold in a foreign country, they pay that country's -- the foreign production, when they sell goods in a foreign country, pay the foreign vat. it's exactly equivalent. it totally removes the disadvantage to american producers. all right. now we're going to quantify a little bit, give you some examples of research studies

that have estimated just how much will the fair tax affect economic growth. this first study here was done by beacon hill. what you are seeing there -- the way economic models work is they estimate the current system and then they introduce change into the model that reflects whatever the tax law change is. and then they estimate what the -- forecast the economic variables. so you are comparing what would happen under the fair tax to what would happen under the base case, which is what is expected to happen if the existing system remains in place. you can see here, this study looked at the impact of the fair tax on real gdp, jobs,

investment and wages. so we have year one, year five and year ten. so you can see in absolutely every variable there the fair tax has an immediate affect in year one. it's still going into year five and it continues by the tenth year to have a pronounced affect. what's especially important is the investment. you can see how huge the increase in investment would be. that's removing the economic distortions in the tax system and not discriminating against savings and investment. this is a similar study, a little bit different model. it also looks at the impact on economic growth in year one, year five and year ten.

i have to point a missing decimal point there. real gdp, that first column over there, that should be 2, 9 and 11%. 2% in year one, 9% in year five and 11% in year ten. but it shows very similar results with all the -- getting an immediate economic impact in the first year and it persisting well beyond ten years. the studies went out 25. i figured this would give you the idea. even consumption goes up. the fourth -- i mean, yeah, fourth column there. some people try to say consumption will fall because you are taxing consumption. but it doesn't. people have -- when no income

tax and no payroll tax, they have more money in their pocket and more ability to spend. dpi, that's disposable personal income. that shows that even when you take the tax into account that they have to pay tax on everything they buy, their spendable income is still higher than what it would be under the existing system. this study takes -- measures a concept we call welfare gain. it looks over the long run. you could equate welfare gain -- you could think of it similar to increase in economic well-being, in purchasing power. it shows that for all three income groups, low, middle and high income, that their welfare

gain all improves for each group. the red bars, that's for the low income. you can see that they get the greatest improvement. the middle income, the green bar, getting the second best improvement. and the -- i guess that's blue being the high income also improve, but much less so. so it is very -- it's a very progressive result. getting into the topic of progressiveness and how -- the fair tax and the poor, the current system harms the working poor. the benefit of the tax loopholes goes to the wealthy. it's justified that you need a home mortgage deduction so people at the

-- levels can buy a home. that's be a lony. i will show you data that proves t. the payroll tax is highly regressive. the income tax you get a standard deduction and personal exemptions. on the payroll tax, they don't apply. so you may not pay income tax on the, say, first $10,000 or $20,000, depending on your family size. but on payroll tax, you pay that tax on the first dollar. you pay it on every dollar up until $117,000, i think it is. the system also harms the poor in that the higher rates of the income tax reduce investment, which reduces pro du s productih reduces wages. in the end, it impacts the worker.

and there's very high marginal tax rates on the working poor, which hurts their mobility. there's really a mobility, the really a disus sentive at several levels of the season where the earned income tax phases out and it doesn't really pay them to work harder anymore. congressman woodal was showing what the proportion of each income group that pay more payroll taxes than income taxes. yet payroll taxes aren't ever talked about, it's the hidden secret of the taxes, which are

very aggressive. i mentioned that all these tax expenditures that congressman woodall went through, and we should have an inseptemberive for that. you see there the blue bar, the people making less than $50,000 only get 2% of the benefit of the tax deduction. the 82% of it goes to those making more than $100,000. likewise, all we need is a charitable contribution deduction. that benefits the poor because charities do things for the poor. well, i won't get into that one, but a lot of charity goes to places that never flow any money to the poor. but anyway, they only get 1.6% benefit of the charitable

contributions, and 87% of it goes to the well off. and then even if you take all those tax expenditures, all those itemized deductions and gather them together. the low income only get 14%, compared to 61% for the well off. so people say, well, you can't get rid of all the kpempations, we need those, they benefit the poor, they do not. the fair tax is progressive. they try to label put the regressive able on the fair tax because it's an assessed tax. it is a broad based consumption tax that exempts the poor completely, they take -- like congressman woodall said, they take the poverty level spending

which is different for every family, and that amount of spending the tax free. so here's the -- this shows the effect of the prebate, the fact that people get refunded, the taxes they pay on spending up to the poverty level. i took a particular family here, two adult, two child household. the poverty level for a two adult two child household is $31,460. they would pay zero tax under the fair tax. and the median income which is somewhere in the 50s to 60s, they would only pay about 10% to

11%. so while the fair tax rate of 23% is the same for everybody, because of the prebate, the actual tax they pay is much lower. this is a study, somebody asked a question about distribution, this is a study that looks at the effective tax burden over an individual -- or the family's lifetime. it takes -- this is a very clever approach, actually, dr. kotlikopf who is going to be speaking here in december, he took families, he created his families and he gave them a income earning history, which is the real world, it goes up and down, and the expenses are higher when they go to colleges

and all that. he created a spending history and an income history. then he figured out what the income tax would be for that income spending history and then he figured out what the fair tax would be. and without getting a whole lot of detail here, the current system is the red bars, and you can see for every income group there in his simulation, the current system effective tax burden is higher than it is under the fair tax, the green bar. what i do need to point out is this is a very good approach at looking at the distribution of the tax burden, because it takes taxes minus social security benefits received, you're paying your taxes and you get something

back. so that is a very -- very good at showing the true burden of the tax system. okay on charitable giving, they say charitable deductions will go away, the point i want to make here is that economic growth drives the deductions, it stays about 2% of gdp for the last 50 years, so the best thing that can happen for charitable deductions is for the economy to grow. i'm not -- i'm going to skip the housing part, because that's kind of complicated to explain here in this short amount of time. so i do want to wrap up with the why i think the fair tax is the best tax reform plan, it promotes economic growth, which results in higher wages, it places u.s. workers in business

on an equal footing with the foreign competition, it's fair, and simple. transparent and understandable. and uniquely, ever pays the tax, we say the poor doesn't pay any tax, that -- their tax as the tax on the bottom and they pay, but then the government picks up the tab. but they see the cost of government. thank you. >> thank you very much. karen. all right, we have a few minutes left for any questions. of the two panels. all right, we have a question that came across the internet. it says if i understand you correctly, social security payouts are based on what is

paid in, how does that play out under the fair tax act. if you want to answer, that's fine, otherwise i know the answer. >> go ahead. i know the answer too, but you haven't been talking lately. >> the fair tax bill is written so that an amount goes into the social security trust funds that is equivalent to the amount that would have gone in if the payroll tax remained in place and the benefit formulas key off of wages and would be presigsly the same as today. employers would report the wages to ssa just as they do today. and the benefits would be precisely the same as they are today. so the terms of the basic benefits structure, nothing would change, it would simply be the sources of revenue flies into the trust funds, the sales tax revenue rather than payroll tax revenue. >> all right, well, thank you

all very much for coming. and we will conclude this event again the next two events are doctor kotlekoph, and the tenth of december, the former cbo director and scott hodge the president of the tax foundation will speak here on how we can improve the tax process, wit means -- trance parngs si on how we do tax expenditures and the congressional budget tax. thanks again, have a good day.

tonight on cspan 3, the supreme court hears arguments on two cases involving racial jerri machbderring. the national institute on infectious diseases, anthony fauci talks about preventing ebola. and a discussion on the recall of defective air bags. last week the supreme court heard oral argument on two cases involving legislative injugeri mannedering. at issue in these cases is what -- this is just over an hour. the argument in case number 13895. legislative black caucus in

alabama versus alabama, the alabama democratic conference versus alabama. mr. pildes? >> mr. chief justice, if it may please to court, rigid racial targets to design all of its black districts based on mere racial statistics along and then -- meet those targets with atron initiating precision. racial quotas in the context of districting are a dangerous business. they can be a way of giving mean norths a phased voting, a fair opportunity to elect. but they can be an unnecessary way of packing voters in ways that polarize and divide us by race.

>> your honor we understand that states are in a bind under the voting rights act of section 2. >> they have to hit the sweet spot without taking race predominantly under consideration. >> this has mapped out a path that states must take to both comply with their section 5 obligations not to use the excessive and unjustified use of racial -- >> it used to require that there be no regression in majority black districts, so if a district went from 69% black to

55% black, you would be in trouble. >> your honor, section five is always required no retrogression based on current conditions. >> and they're saying, that's all we did, these districts were under populated with respect to other ones, so we had to move new people in them. and we had to do it in such a way that there was still the 69% black population that there used to be in order to avoid retrogression. >> your honor, retrogression is built to preserve the minority and majority. >> the only way you're doinot dg that is to maintain the same percentage. that's the way the justice department in the battle of days

used to look at it. >> doj employed various kinds of practices as you describe. as our brief documents in detail, the department of justice has routinely recleared plans that would reduce black populations as long as they don't reduce the ability to elect. in alabama in the last process of redistricting, if you look at the black caucus, at the chart at 8a, you will see that alabama dramatically reduced black population in all of its districts in the senate and virtually all of its districts in the house. if you look at that chart, you will see numbers like a 12 point reduction, a 10 point reduction, a 16 point reduction. >> why is that? why do you no longer need as high a percentage of minority voters to maintain a situation where minority voters can still elect their candidates of

choice. >> for the reasons that this court averted to and the reason that alabama rightly celebrates in its briefs. black turnout and black registration rates in alabama routinely equal or even exceed white registration and white turnout rates. >> i assume that you're making the argument that the opponents of black plaintiffs used to make here. they said you know by requiring packing of minorities into certain districts, you're reducing their influence state wide, so you know of the representatives and others -- in other districts can't ignore what the minority wants. because they're all packed into -- that's the argument the other side used to be making. >> yes, your honor, and when the voting rights act legitimately requires the use of race in the face of polarized voting. then there's a national, political judgment that reflects the tradeoffs, the costs and the

benefits as there are to designing these districts. >> do you suppose there are a party a in 2001, takes minorities out of heavily minority districts and puts them into opportunity districts. for political purposes, it's for partisan geri mannedering purposes. party b gets into power ten years later. it wants to undo what party a did. and it puts them back into the heavily populated districts. is there a violation when party b does that? >> and we'll stipulate that it's motive is simply to help it's partisan balance. or partisan imbalance. >> if they do not use racial populations. >> they put minorities back into

heavily packed districts just as they took minorities out ten years before. >> but the line this court has drawn is the line between partisan -- >> looking at my hypothetical, it's partisan, in either case, is there a violation? >> if it's purely partisan in motive and they don't use race, then there's no problem. >> they do use race, but it's purely partisan, case one, they find minority voters and put them into minority -- unpacking the very heavily minority populated district. then the next party comes in and simply undoes it. and it uses the same calculus, race.

>> if they exceeded their obligations in section 2 and section 5, they went beyond the limited leeway that courts have. if they have the strong basis that's required, that's the legitimate path states have. >> they do this for partisan purposes? >> your honor -- >> i'm asking if party b can then undo it for partisan purposes. because i sense that there's a one-way ratchet here. >> i understand your concern, but if for partisan purposes, the legislature passed a raced base barrier to voting that would be unconstitutional. they can't use race in the way these -- are beyond the parameters the states have s they have to have a strong basis in evidence. in this case, alabama didn't

even ask the relevant basis question. alabama didn't even act what might be necessary to preserve the ability to elect. they just reproduced numbers, statistics, and the way they did it, is they just used racial data. >> you began by criticizing alabama by supposedly imposing quotas. but listening to your argument, it sounds as if you're interested in quotas. you're just interested in lower quotas. if they take it down to the minimum that would be required, in order to produce the desired result, that's a permissible quota. >> you don't have to word quota. why did you use it? >> i actually meant to use the word racial targets. >> you think there's a difference between the two? >> well, there's a lot of rhetorical and inflamory quotas.

>> that's in justice kennedy's testimony, i thought you would say there wasn't a one way ratchet. if you're doing this for political reasons, because many, many african-americans vote democrat, all right? so what they're doing is they're trying to help the democrats. so yeah, we're trying to help the democrats, okay, if that's what you are doing, and you can't really prove the contrary, the burden is on attacking the district, whether they're doing it by removing some african-americans from this one or by putting more into it, it's the same issue, am i right? >> yes, you're right. >> and it's not a one-way ratchet, it is a two-way ratchet. >> and it's valid in both cases. that's your problem. >> that's not our case, because in our case, they don't try to defend on that grounder.

>> that's the answer i was trying to give to justice kennedy, which is part san manipulation this court has said may be fine and constitutional. but the one thing you cannot do is use race as a proxy for policy affiliation, you can cannot use racial targets that don't have a legitimate justification. they're not tied to current conditions. >> i thought you agreed with justice prior. now you're saying that you cannot use race as a proxy for political affiliation. but that was hypothetical. these people were moved because blacks overwhelmingly vote democrat. you're saying that's bad if that's the reason they moved. i don't think he thinks that's bad. >> i think justice pryor to be ze kribing a -- you have voting behavior data. you're moving them because they're black and you think blacks will overwhelmingly vote democrats, because they're

black, because we assume blacks are overwhelmingly democrats. >> your honor, in this area, the court has said assumptions like that cannot be the basis of the way district lines are drawn. >> because your time is running out, in your presentation, you're saying we are attacking the state wide plan, we are not picking undistrict or the other. and you have been attacked on that point. the attack is it's your claims have to be district by district, they can't be state wide. so i would like your answer to that question. there hasn't been a -- there have been -- >> your honor, our claim is that the exact same policy was applied in every black majority district, which is we will use racial data to repopulate as close as we can possibly do it to the kpablg same black percentage. that's a policy applied in all

36 districts. >> how are you clients hurt by that? it seems to me you have to come up with a client in one of the other districts that would have been, as you put it, more competitive had this packing not occurred? >> you assume that's the harm that you're alleging. >> your honor, the record demonstrates that we have members of the adc in many of the black majority districts at issue, and that at least is sufficient to challenge this policy that's supplied in those districts. >> i thought the record just showed that you named your plaintiffs by county, rather than district. >> but many of the districts are wholly contained within the county. and we demonstrated in a number of districts and a number of house districts. >> do you think your district by district counts, your claim

relyings ole -- >> by state wide, we simply mean a common policy applied to every district in the state. >> thank you, counsel. >> this court's show on jurisprudence chachbls the conversation that we're having today, this court has identified two constitutional claims that could be raised with regard to use of race and districting. one is intentional delusion of minority votes for the purpose of minimizing their effectiveness and the second one is shaw. we're venting the shaw plan. >> you lost on the delusion plan. >> we did. >> the facts material to the

sharp claim were not at dispute at trial. the question is whether they fall within the concept of predominance in this court's line of decision. >> did the district court understand you to be asserting a district specific claims? >> i think it understood us to be challenging each of the districts. >> where do you find that in the opinion of the district court? i thought the district court interpreted you not to be making that claim. >> i -- we advanced evidence as to the motive that was a motive common to all the districts and then we advanced, offered evidence got particular districts to illustrate how that was played out. but this is ---there's no conceptual difference between challenging all 36 districts.

it's the same claim. >> but specific in your proposed findings, you dealt specifically with certain directs and not specifically with others. >> the specific information dealt with many of the particular districts, but the claim was that all of the districts were the result of a common purpose, in that common purpose, race was the predominant and overriding. >> some of the districts were unchanged, the percent sajs was exactly the same as it was before. those are the only districts that your clients were from. how have they been harmed? >> our clients, we have members in all the districts. the theory of harm in the -- >> was that established in the district court, that you have members in all the districts?

>> this concerned -- >> the finding of the district court was that you have members -- >> i think it said all or virtually all. our standing wasn't in dispute. the concept of injury in the shaw rain line of cases -- those are people who don't have standing. in hayes, this court may appear it's individuals in the district into which blacks are put for the predominant racial purpose, the predominant racial kurp. that's the standing that this court has announced in these cases. predomination involved under this court's -- >> i don't understand what you just said, they have a claim because -- >> there are too many blacks in their zriblgt? >> it's not about the number. the theory in the court in shaw, is that if race is the

predominant purpose in putting blacks into a districts, that that will likely result in re representational harms. that's been the theory of the shaw claims ever since shaw. >> and you think it's possible for the state to navigate between not enough minority members in the dprikts and too many minority members in the district without taking race into account? >> no, we do not. >> but shaw doesn't say that taking race into account raises a constitutional question in all cases? particularly in the wake of this court's decision, easily, which made it clear in the resolving issuing. the majority of the court held there that for shaw purposes to trigg trigger trick scrutiny, they would have to -- it was the

criteria to which it could. be put aside for any other -- >> so they have to navigate between too many and too few. >> if race isn't the predominant purpose, then there's no constitutional claim. with regard to steck shin fi5. i think it would be helpful to identify what section 5 requires. this is -- in the 2011 guidelines f government's view and this is how this has long been understood, that the black proportion can be reduced to the point where blacks no longer have the ability to elect the candidate of their choice. until you get to that point,

changes are not retrogressive. >> it's speculative, but i think if alabama had reduced the number of majority voters in majority/minority districts in a significant way, the attorney general would have come down on them like a ton of bricks. >> that's not correct, your honor. >> he also -- the government's view of this is set out in georgia versus ashcroft and in the oral argument of mr. stewart at the time, as they claimed it and this remains their view and consistent with the way the department has operated, until the numbers can fall, until it gets to the point where the ability to elect is in question. >> i have a problem. can i just go back to your shaw nonshaw? >> basically you're saying you don't have a shaw challenge?

>> i have a shaw challenge. it's a emfemoral injury in the way that race played a part in the plan, without effect in a particular district. >> no. >> in a particular district, if it stayed essentially the same, they didn't move the boundaries much, they obviously -- they don't, it's an all white district if they moved the boumpbtd, it wasn't to include more blacks or anything else, it was just because of geographic divisions. so explain to me whi you don't have to prove that you are harmed specifically by the application of this policy. >> there's two things in response to that. first, the theory of shaw is that if black voters are for predominantly racial reasons

moved into a district for predominantly racial reasons that would trigger scrutiny. >> but that was wasn't true. >> yes, it was. >> i think what he meant was the black percentage hadn't changed. all of these districts changed, they were underpopulated on average of 15%. there's an average of 6,000 voters put in every house district, 20,000 in every senate district. >> now that you're talking about districts, could i come back to the question i asked in the beginning so that i understand what we have to decide. on page 128 of the joint appendix, there's a paragraph in the district court's opinion of what the court understood to be before it on the issue of intentional discrimination. i see nowhere any indication of the district court construed your pleadings and your other

submissions that waves a claim about any specific district. the third point is we construe the filings of the democratic congress district that certain senate districts constitution racial gerrymandering. maybe i'm missing something. if that's how the district court understood your position, then maybe it was wrong. but that would be the threshold question we would have to decide, wouldn't it be? if you have to be district specific, we would have to say the district court misunderstood the claims that you were asserting. >> i think in the context of the way the case was litigated and tried and the briefs at the time, it was everybody understood that claims were challenge all of the majority black districts. >> the district court understood that? why did it include this

paragraph and what did it not go through the ones that you saw as challenging. none with respect to you? >> we think in the context of this case that was litigated, there was no conceptual difference between challenging all the districts and challenges 36 congressional districts. the reason the claim reads the way it does is that the state didn't contend and we didn't con thaechbd there were district -- the state's account of this, which everyone accepted was that the state had a common purpose in adding those thousands of individuals to each district, which was to -- which was to continue the black percentage as it had been all along, it was a purpose common to all. >> and mr. schnapper, wasnyou i

fact did reference particular districts, you referenced district 18, 19 and 20. and in other places you talked got all the majority black districts in the states's black belt. and you explained how your theory of the case related to each one of those districts. >> we did. >> this is somewhat analogous to the teamster's decisions back in the 1970s, with the government to prove racial discrimination and promotions offered evidence that was class wide, that affected all the individual blacks and hispanics and then offered some individual stories, but the claim was for all of the individuals who worked in those plans, in those facilities. >> so get there, you're talking about the black caucus pleadings is the act as a whole of constitutional geri mannedering.

they didn't get the kplachlt right, we're going to have to send it back, to send it back, i guess, would there be anything wrong with saying this, look, tell the plaintiffs, please, to point district by district to the fact that the primary motive here was racial. i don't think that would be too hard. you have loads of evidence on that. if the primary is racial, and this is the crucial part. then then to justify this, have to show that they are making a, and i don't know what word, reasonable attempt? good faith reasonable attempt? some other word? to comply with the old section 5 requirements. the section 5 rimpls. now they have to do it over again anyway. so they do it over again. and in fact, some suggestions and that's what they were trying

to do. and you would have evidence there, you would say no, no, that sngtd what they were trying to do, they didn't even read the guidelines of the attorney general, they didn't even look at what happened in the past. they made no such attempt. so from a mural point of view, anything wrong with that holding? >> your honor, i think with regard to the question of justification, we think it doesn't make any sense, in light of this decision, in shaw 2, the court's decision makes it clear. what they did was judge by the correct interpretation of the statute, not what they might have thought in good faith that mattered. and it's correct in a number of the -- secondly that the purpose to comply with the correct interpretation has to have been their motive at the time. and secondly, at the time not at trial, but back when they did this, they had to then in 2012

have had a strong basis in evidence for concluding that not using all these different numbers would say -- you could send the case back to 20 -- you can't send the case back to 2012 and have them change the purpose or change the evidence before them. unless you're going to change -- other affirmative action related cases. you could not do that. it's years too late for them to solve those problems. and -- >> i'm still having a psychological problem with your point. there were three reasons, they're saying herely because it was among the three, it necessarily was predominant as to each district created.

it was a hypothetical i posited for you. it was the primary reason above all others is that it was a 2% district and there may be districts among these 36 that as i indicated had con tig wous populations that didn't make a difference about race. so they're not affected by this policy, why should we undo that? >> let me just answer this one question, as the analysis of the preceding districts shows, there's raced based precinct splitting on every one of the majority black districts questioned. it wasn't just that they took the neighboring districts a chkd they turned out to be just the ratio they wanted, it was very, very calculated and raced based.

>> thank you, counsel. >> the key point in this case is that saw claims district -- the district court departed from that principle and in our -- >> what the plaintiffs are saying is yes, we have common evidence not all together usual in a shaw claim, but here they have evidence. it's a policy statement that retrogression was going to be a very mean priority. and retro aggression skr wwas dd in a certain way. and that was going to be taken

into account in every single minority/majority -- that relates to every single district, so in effect the evidence state wide does not make it any less a district by district case. >> that may be right, justice kagan, but it also doesn't prove that race predominated in the shaw sense with respect to each particular district. let me explain why. the test under shaw is whether race predominated on the delegation of redistricting criteria. resulted in judgments that to draw the districts in ways that -- such as compactness and maintaining communities of interest, but it may be the other districts that it didn't and i can provide specific examples of that. >> i guess i would appreciate specific examples because it

seems to me as sort of a going in matter, when you say this is the most important thing except for the reynolds inquiry. this is the most important thing that necessarily, it's going to avblgt the way you redraw or what you put into the districts. you might not reach the target in every single district, but necessarily you're saying, we are prioritizing this race based thing, cry tier i don't think in a way that's going to affect every judgment we make. >> but we read the shaw line of cases as to whether it's done in deregacey. >> if you have three priorities or three criteria and you say this is the absolute most important criteria, the natural affect of that is going to be to minimize the other two criteria. >> that's not necessarily try, sometimes they'll kick, and sometimes they won't.

i'll give you examples that will illustrate that from the report. there weren't specific findings about these districts in the district court's opinion, so i'm not trying to say this is what the district court found. for example in house district 67, the state argumees that tha was a state in which you are going to have an african-american percentage, at the percentage that the district was drawn at, no matter how you drew it. and that was because the surrounding populations around the district were all of comparable african-american percentages, so whatever choice you made in order to get to the 1%, 2% -- it's a situation in which traditional drishlging criteria drove the decision. there may be other districts, and district 26 is one that comes to mind is where you had

14,500 people in the city of nont bombry and surrounding areas, all but 35 of whom were african-american. and if one looks at that map, and it's very difficult to discern in the small maps that are in your material, but if you can get a blowup of it, what you will see in that map, the so-called crab claws that extend out from the district from african-american populations, what they do is carve out the white part of the city of montgomery and attach it by a very narrow land base. >> what about the economic data? >> then it would not be a problem. >> but it results in the same thing? >> but wouldn't -- i want to go back to the question that your honor posed earlier when partisanship can be a -- if a state were to move electoral

presiblgts, there you would have the data on how the people voted in that precinct. that would not raise a problem under the shaw analysis because you would clearly be making a decision for partisan reasons. but when you split a precinct and you move just on the census population, you know don't how they voted, you just know their race. if you're using race as a proxy, in that circumstance, that would violate what this court has said in all it's shaw cases is the constitutional norm at stake here, because you're making an assumption, you're stereotyping in that situation. >> so that's true at the out set if you move them by race in order to increase their capacity to influchbs districts? >> that's a difficult question, your honor, but i think if you're moving people by race in order to ensure that you're not

violating the voting rights act, then it's a one-way ratchet. >> >> you say that the district court in addressing the claim of racial geri mannedering on a state wide rather than on a race specific basis, i would assume that was an error on the part of the district court unless an -- >> i actually think this is quite a working question. i think we agree, your honor as quite right that the district court did appear, and there's a place where they did appear to assume that this was a state wide claim n some respects one can understand why, because the basic theory is that the motive influenced every district. and it did adjudicate the case on that basis. so it did seem to me that one

outcome would be that the proper understanding of shaw is that the claims have to be made on a specific basis, and that claims didn't propound recognizable claims under shaw. and that would be run resolution here. judge thompson did say he thought that the claims were district by district specific, justice kagan has identified, so another option might be to arrest fick late the district's standards. >> you don't deny that a state wide policy can refer to every district or every majority/minority district in the state. >> our point is that's not enough to trigger strict scrutiny, you have to look at see if it's implemented in a matter -- >> i don't want to press it if you have given me your best answer to it. if a policy says we're going to

prioritize this particular criterion, which here was the mistaken understanding of retrogression, if it says that we're going to prior advertise this beyond anything else -- >> if it's der ration -- >> if the policy says it's going to prioritize it over everything else, that means it's going to be in derogation of district -- sometimes they might fail. sometimes you're not going to be able to prioritize it over everything else. but the intent is still to prioritize it over everything else. >> but the question is, let me take a step back because i think it might help to put it in this context. a shaw challenge is a challenge to a neutral government action. the lines on the map are what are being challenged here, that's the government action.

those lines are neutral. they may in fact affect a violation of the constitution under shawive race predominated in the placement of those lines. but that's what you've got to prove. and the mere existence of this motive doesn't prove it for each district and that's our point. if i could, i would just like to raise one point in my remaining time going back to the question of what section 5 retrogression. >> you may also address what affect if any it had. >> the two are quite related. i think professor pildes referred you to this chart. the difference between the 1993 plan and the 2001 plan, the justice department cleared the 2001 plan that alabama submitted and you will see for every single district listed, with maybe one exception, there were

significant reductions in the minority percentages in those districts. so alabama knew perfectly well that it was completely consistent with it's obligations under section 5. >> you asked for a remangd, the results of remand would be the re -- >> that's certainly correct. >> and that's not a concern for you? >> it's not a concern for us. it is what it is, mr. chief justice. if on remand, the district court concludes that some of these districts violated the constitution, then alabama will have to -- this legislation will get its first chance for a legislative fix and section 5 worvelt be a basis for them to take any action. >> thank you counsel.

>> mr. brasher? >> thank you, mr. chief justice, and may it please the court. i think i should given with the district court's fact finding. because the district court found that race did not dominate. and we can avoid addressing questions about sec shichb 5 about redistricting. on page 144 of the jurisdictional statement appendix, the district court expressly found that we did not impose a quota. the court says that we imposed no -- we followed preexisting district lines, we followed roads, we followed county lines, municipal lines, we met the needs of incumbents and we preserved communities of interest. the plan that we passed is a status quo plan. the whole point of the plan was to preserve the status quo, because the majority had won the legislature for the first time in 1 30 years.

>> but the other side says it was impermissible for you to preserve the status quo because the majority in the minority districts to participate in the electoral process had improved to the extent that maintaining the status quo would be characterized as packing? >> actually if you look at, two responses to that, your honor, the first is that if you look at the micus brief supported by political scientists, they show that black voter turnout and white voter turn out actually equalized in 1998. so there actually isn't some difference between the districts in 2010 and the new ones that we proposed with respect to those criteria. the second point i guess i would make to that is that, our redistricting criteria are nonracial redistricting criteria with the objective is -- the objective of these nonracial redistricting criteria was to preserve the status quo. i think that's what the united

states attorney general was getting at, that it's difficult to disentangle that we're trying to go with the status quo of the minority black districts. >> is it fair to read the pleadings a and the submissions in this case that the state did not defend this plan on the basis that it was for part sachb purposes but that it was to comply with section 5 in was that a fair reading of a of the read brief and bhrks of what the district court found? >> i don't think it's a fair reading either, your honor and this is the reason why. specifically with respect to -- one of those districts is senate district 11 which was specifically challenged by the alabama democratic conference and the district court held that the changes to that district were based on politics. now with respect to the plan as a whole, our response has always been that the there's a lot of

factors that went into drawing the plan as a whole. and i think it's porvelt here that the plaintiffs have never proposed a redistricting plan, especially the 2% deviation in population that the legislature adopted. i think that's important for three reasons? >> are you really saying that that's a pleading requirement, that they have to come in with a plan that meets all the rest of your criteria? >> i think it's an evidentiary issue. i think it's important for three reasons, first because the legislature adopted that 2% deviation to end the previous geri machbderring that the -- the plaintiffs brought a partisan geri mannedering claim. and the second part is what i alluded to earlier. the court held that the first step of a racial geri man zering

claim was that there was a -- greater racial balance. and the fact that they have never produced a plan that does that is a serious problem. if you want to see if race is precome nangtd, you take race out and you run it again and you see what happened. >> let me just give you some numbers here from some of these districts. hd 52. you needed to add 45 -- which was your number one criterion. you added 1143, you missed by two. hd 55, you needed to add 6981, you added 6984. sd 63, you hit it at 15,185. those nibs speak for themselves, don't they? that in each of these cases, you were determined come what may, and disregarding other criteria to maintain the black voting age

population. >> i don't think that shows that for two reasons, first i agree with the united states, mr. general, is that the question was that -- >> that was just a coincidence? >> no, but that goes to my second point is that those house districts you were reading off are in the city of birmingham. the city of birmingham is 73% black. >> it's 73%, and you hit that 73% exactly. >> that's my point, there's going to be some of those house districts that are going to be 73% black. and in a place where there's more than 200,000 people and 73% of them are black-- >> i think you kind of do actually, because you're frying to repopulate these districts and many of these districts, yes, there are many, many african-americans. but as you just suggested, there are also white people. and you did it so that you know completely replicated the exact percentage figure. >> i'll give you another example

of what i mean. house district 67 which we talk about in our briefs is a single county district, it's always been a single county district. it's always going to be 70% black because that county is 70% black. these nablds are 73% black and that's how we hit those numbers and we certainly have proven otherwise. the failure to propose a 2% plan is important, because of a 10% plan. are drablgtically different from a 2% plan. it's like comparing -- their senate districts can vary by 14,000 people. and ourselves can vary by only 2,000 people. even though these plans are drastically different many of their districts have exactly the same black percentage districts. we lay out the senate districts

in their proposed plan and our proposed plan, you'll see district 18, 19, 20, some of the districts that justice kagan was talking about earlier are almost exactly the same in all three plannings. if you look at senate district 33, it's the exact same in our plan and the black caucus's proposed plan. it's the only way you can draw senate district 33 with -- >> what about senate district 26? >> senate district 26 was 70% black in the previous plan and it's 70% in our plan. the plaintiffs testified in this case that the marry of montgomery city is 99% black, and because that was one of the senate districts that they actually challenged, we have actually good faith credibility determination from the chalk board because the gradraftered actually testified and they said

that because of the way population shifted they had to join anned a joining district. and that left an orphan county, crenshaw county, as a rural county, south of montgomery, they explained that what they did was they took part of former senate district 26, took it out to make a way to skekt the rural crenshaw county to the rest of senate district 25 which was already commonly ruled. >> if you look at that district, it has a very bizarre shape and the efblgts of the bizarre shape is to include african-american areas and exclude predominate. ly white areas. >> if you look at the comparison map, you can see a comparison between a former district and the current district. and what you'll see is up at the right -- i'm sorry, the left -- the left part of montgomery county, that's where the former district used to be, it was part

of senate district 25, that came into the middle of that dprikt, sort of came in the middle of it and what the drafters did here, is they dpru the lines closer to the city of mochkd bombry, and middle. they took some precincts and parts of it along those lines and moved them from senate district 25 to senate district 26. i want to correct something that my friend said, we didn't just move black voters into that district, we moved hispanic and white voters into that district. >> usually in these cases you're looking at these funny-shaped districts and you're trying to figure out from the shape and from other matters whether race has been used instead of traditional district and criteria, but this is very sort of -- this is sort of sweet, generous claim because here the principal evidence in the case is not all the circumstantial stuff that we usually do, it's a

policy statement from the state that says race is going to be our principal cry tear yan except for reynolds. and then clear testimony from the people who were applying that policy statement that they thought that that meant maintaining the black voting age population, something which is mistaken understanding of what retrogretion entails. you don't have to look at the circumstantial evidence, this is how we understand it in such a way that it's going to insure a 68% district stays a 68% district and a 52% district stays a 52% district and so on. >> well, just two quick responses to that justice kagan. the first is that the state is always going to say that

complying with federal law was a top priority because federal law is supreme. >> this is much more than that, this is very specific saying where the two legislatures principally in charge of this said this is what we understand the requirements are, that we're going to maintain the black voting age population in each district. >> well, that brings me to my second point which is that imagine had we done the same thing that the plaintiffs are suggesting and we had higher political scientists that said 55% should be the target. i don't think that we can say race predominated in that circumstance just because we had a different target. they are bringing a circumstantial case here. we said this is -- >> justice kagan's question points up the fact that the defenders of this plan did not rely on the fact that it was a politically jury-manded and that of course they said it was the

2% goal but the basis was race cocomply with section 5. >> certainly with respect to certain districts they were based on partisan ship. and so had they challenged specific districts we would have responded in kind with respect to those specific districts, but they never challenged specific districts below. to answer justice's question, look at 194, the black caucuses post-trial brief -- this is a circumstantial case because the only evidence -- it was challenged by the alabama democratic conference. because they specifically challenged that -- about the testimony with respect to that specific district. >> let me ask you about this

section 5 mistake. isn't it so that both the district court and alabama were laboring under the impression that retrogretion meant you have to keep the same numbers? >> the district court made an express fact finding here that our goal was to prevent substantial -- >> if that's a misunderstanding of what's section 5 requires, then the whole thing is infected by that mistake. >> well, i disagree with you about it being a misunderstanding. in 2006, congress told us we would not diminish the ability to elect black voters. my friend professor testified against the inclusion of that language in congress and he told them if they included that language it would, quote, lock in place, end quote the majority black districts in the south. if you cannot diminish the ability to elect, if there's a safe majority black district or

100% chance, you cannot drop that to where they have a 50% or 60% chance. that's what we were setting out to do. this court said that they have lead way in complying with section five that we do not have to hit things right on the top. >> i don't understand your response. there are different interpretations of what those 2006 amendments mean, right, under one interpretation it was a codification of justice suitor's opinion and so majority minority districts could be transformed into influenced districts. on another stricter interpretation, perhaps, no majority minority districts had to stay majority/minority districts but in no interpretation does a 76% district have to stay a 76% district when circumstances change and when the ability to elect candidates of one's choice does not require it.

>> well, decreasing the proportion of black voters will generally reduce the chance that the minority's groups favored candidate will be elected. and the district court i think that korng was trying to go to go back to, quote f existing opportunities to exercise the franchise are robust a proposed plan that leaves those voters with merely a reasonable or fair chance of elects a candidate of choice may constitute retrogretion. only 55% black district would only give those voters a reasonable opportunity to elect. >> suppose -- i don't know, i want to know what you think about the practicalities of sending this back. assume in the back of my mind relying on state policy is

this -- a state legislature gets up and says n our state there's a history of discrimination against black people, there are fairly fu black representatives in this body. i would like to find a way of drawing district lines so that we have a few more. >> okay. >> that's the normal way this case comes up. this is an odd situation. i don't know that that statement should automatic matly disqualify his plan. maybe we should look further into it and see what they actually get. suppose i start there. then i say, okay, i suspect they'll be able to prove that at least in some districts, at least in some the statement of legislature here did prevail and did make a difference. so i don't know what the defense is possibly going to be. and since we can't even think

what the defense is, why don't they just redo this plan over in the legislature. what's your response to that? >> there's a couple of responses. the first is i think it was a lot of trouble to redo a sflan. >> it is a lot of trouble. >> you want to go to that lot of stroubl before a lot of extra trouble in court proceedings or do you want to go through that trouble right off the bat and get it over with? now i expect you would have answer answer to that and i'm not taking a point of view. i want to know what your response is. >> to respond to that pointed question, this plan was passed after 21 hearings held throughout the state of alabama. it was passed after extensive legislative negotiation. it was passed in a special session of the alabama legislature, it was called for enacting a redistricting plan. we do not want to go back through that process. >> of course you don't. will there be a defense left that could stop you from having

to go back? >> yes. i think the united states agrees with me that the question here is whether there was a strong basis in evidence for us to believe at the time we passed this plan that we had to comply with section 5. we had that defense even if we're litigating district by district. but let me say something -- >> what did it mean to comply with section 5? and that's -- you can say strong -- everybody agrees that that counts. compliance with section 5, strong interest in doing that. but if you think section 5 means you got to preserve the same numbers and that's not what section 5 means, then the whole premise on which the district court based its decision was wrong. >> well, i don't think so because i think the district court's decision was premised on the fact that race was not the predominant factor in this plan. but to go to the question about section five, we adopted a very responsible section 5. it was the exact same thing that georgia did in 2005 and that congress said in the house

report when it reauthorized section 5 in 2006 -- >> if that turns out to be wrong, i guess you're still not guilty of using race. you're still trying to comply with section 5 as opposed to being racist, right? >> that's exactly right. they did make intentional discrimination claims -- >> if the district court said that race was not the purposes, in the district court's view, what was the plan? >> i don't think there's a need for a district court to identify any one -- >> i'm asking in this case what did they say? wasn't it the assumption they wanted to assure preclearance under section 5 and for that reason used race. so when you say the district court said, well, race was not the purpose, it was close to the purpose because they were trying to use section 5 and use race for that reason. >> well, it was certainly -- >> 's