final seconds of our annual kayak race. i believe it's a tie. what do you think, tucker? >> tucker: you know, i think clayton won. >> clayton: do you have whip whiplash? >> tucker: i do. >> alisyn: thanks so much. see you tomorrow. >> irs, sos as the scandal keeps sizzling. some republicans are calling to scrap the agency and it' its mae tax code and bring on flat tax instead. is that the best way to prevent this mess from happening again, and get our economy booming again? hi, everybody, i'm brenda buttner. this is bulls and bears. let's get right to it. we've got gary b. smith, tobin smith, and steve murphy. welcome to everybody. so gary b., shut down the irs as we know it and replace it with a flat tax? what do you say? >> absolutely, brenda. this would be the most positive thing we've seen for this economy. i think since the internet.

i mean, this would be unbelievable. look at all of it. i can't see any minuses. look at all the benefits. one, we get rid of the irs which means we get rid of these irs scandals dating back before brez nixon up to -- president nixon up to the current administration. we save billions on productive, raise more revenue, make it fair. i mean, brenda, this would be the best thing that could happen for the market, for the economy. they can't pass it quickly enough. >> well, they've been trying to pass it for a long time. at least a lot of politicians have been talking about this. jonas, a flat tax would have some very popular deductions likely, like the mortgage and the charitable deduction, but would that really get rid of the irs? >> no, because the complexity is in the deductions and the exemptions and all of the little corporate, the things you can set up to avoid taxes. i actually felt, you know, watching the entire hearing on the fox business network, i started to feel bad for the irs. it's not their fault they're put

in the position. congress made the ridiculous tax code they have to enforce. they're merely the accounting police. they have to sit in front of congress, and it' it's a mess. going to a flat tax doesn't make it simpler. >> sure it does. >> see, jonas does not want to get audited. he's the one supporter of the irs that we've got. what do you mean, not at fault? toby? >> i don't know what jonas is smoking today. if you look at the actual numbers, and whether you take the flat tax and bring it in over a time period, over a five-or ten-year period, gary is absolutely right. you talk about prosperity. first off, we would probably have dow 25,000 instead of 15,000 simply because earnings would be higher, growth rates would be higher, and that wealth effect would then create the thing missing in this economy which is the spiral up effect, the idea that growth begets jobs, jobs begets growth. number two, you know, if you were in a situation where you

could take that much inefficiencies se out of a systm and have that reinvested in oh, dare i say, actually efficient stuff, you would have another multiplier effect. number three, and by the way, all people would participate in paying taxes, not just 20% of the people. that's not a bad thing either for society. >> i like that, efficient stuff. steve was laughing over here. why are you chuckling, steve. >> >> well, first of all, you need the irs because you could cheat on a flat tax whether you have deductions or not. secondly, i don't think any proponents, even you two, talking about a flat tax mean a real flat tax. you want to reduce income tax rates for the wealthy. >> no. >> you don't want to tax all income. i'm talking. let me finish. what about a flat tax that taxes all income the same? >> okay. >> inheritance, earned income, earned income, the social security tax, medicare tax. >> i'm in.

>> i think we're hearing it from both gary b. and toby, but gary b., it's so unlikely anything like that could get passed, could it? they don't have the political courage to do this. >> well, yes. unfortunately i think you're right. it's exactly going to the point that jonas is making. jonas was talking about not a flat tax. he was talking about a simplified tax. oh, but you'd still have the mortgage deduction. you know he why you have the mortgage deduction? because the whole real estate industry would be lobbying in there because they know if that goes away, they think that, you know, home sales would go down. what i would love is what steve said, though. get rid of the mortgage deduction. the government should not be in the industry of saying it's better to buy than to rent. get rid of that. get rid of charitable deductions. get rid of all that stuff. make it simple like steve forbes had on the back of an envelope. i would raise my hand and say that would be fantastic. >> i've got to go to jonas. go ahead.

>>is scandal exists because you can have a non-profit organization. if there was no such thing as an organization that didn't pay taxes and everybody paid the same rate including the scientology church, there wouldn't be this scandal. getting back to the point of the previous guest, you have to move to a zumay consumption tax if yu don't have the irs. even the 5% flat tax would be a fantasy across the board with no deductions. someone still is going to say i didn't make 200 grand, i made a hundred grand because i'm self employed. who is going to show up at their house and go through their bank accounts and prove they're lying. >> i'm happy to introduce john layfield. we have some technical difficulties. he's with us. i know he's anxious to jump in on this. go ahead, john. >> that's because he's been getting audited. that's why. >> i have been getting audited. that's funny how that works. i spoke out about obama care, and i guess if i spoke for obama care, i guess i wouldn't have been audited.

texas is creating all the jobs and the tax is very low down here. look. this flat tax is right. you've got to take this irs out of the question. what they have done the last few years is absolutely criminal. it's not on some lower level. it is targeted. what they did with karl rove, with all the conservatives in the tea party. this was targeted and a political weapon. you need to do away i with it. >> toby, that's to the point. this is not just about taxes. this was targeting a specific political group, and we've seen it, you know, for the last decade of different types. >> i also found it interesting that the president made the speech at ohio state a couple weeks ago saying how, you know, there's going to be people who tell you that, you know, tyranny is right around the corner. don't believe those people because they're making it up. they weren't making it up. it's probably deeper. if this was the only thing, i'd be very surprised, brenda.

right. the flat tax takes that power away, number one. number two, we'll be all so prosperous and working so much, we wouldn't have time to care about this ma lar key. >> steve, go ahead. you're laughing again. >> yes. you know, you're talking about eliminating deductions. you're not talking about taxing capital gains at the same rate that you tax interest on bank accounts. >> sure i am. >> you are not. >> sure i am. >> that's not what the prones. >> i absolutely am. >> secondly, there's no tyranny unless you think stoopedty is tyr -- stupidity is tyranny. >> okay. hold on. i've got to go back to john. tyranny. stupidity. you think this was stupidity? john? >> absolutely not. you're on the front end of that if you believe this isn't tyranny. look what they did to van der

sloot. within four months he had three audits, his business and personal income. karl rove had a confidential report released to the press, and what they've done with the at tea party and conservatives, this is not isolated, guys, and it's not stupidity or incompetence. tyranny is the answer. my friend toby is right. >> toby, got to give you the last word here. >> i mean, we're not blaming the fire here. the fire is already burning. if we wanted to put it out, absolutely. a reasonable flat tax, everybody taxed the same, all income, all everything, fabulous. >> all right. thanks, guys. good debate. coming up, think all these scandals are going to have the market i and economy taking a h? you better know what happened during watergate. monicagate. iran contra. a history lesson from neal's gang that could determine if these scandals will hit you in the wallet. that's at the bottom of the hour. up here, first.

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>> and good morning, everybody. live from america's news headquarters, i'm jamie colby. the ntsb is on the scene of a horrific train crash that happened in connecticut late yesterday. federal investigators are trying to determine what caused two packed commuterr trains to collide. 60 people were injured and at least three have critical injuries, we're hearing. the crash severely damaging the tracks. officials say cleanup at the site is expected to take days, if not weeks. we're following that story for you throughout the day. overseas now. north korea launching three short-term missiles this morning into the waters off its east coast. according to south korean military officials, they are saying the north's intent is unclear, and south korea says it remains on high alert in case of further military action.

i'm jamie colby. we're going to have more headlines for you just 30 minutes away. i'll send you back to bulls and bears. keep it on fox. >> brenda: so, talk about higher learning. uncle sam now expecting to rake in a record $51 billion bucks this year from student loans. that's more money than the country's most profitable companies, exxon and apple. meanwhile, total student loan debt rising to a record high. john, is this proof the government should get out of the student loan business? >> absolutely, brenda. this is proof they need to get out of the student loan business. these kids are coming out of college so laden with debt and they're not getting good advice. you talk about predator lending? this is an absolute buffet for these lenders. kids can rack up all the debt and they're not going to be able to default even through bankruptcy. you have this massive balloon of

student loan debt which is killing the economy because they can't buy cars, they can't buy new homes. the government has no business in this. they need to get out. >> brenda: toby, it's interesting because corporations, homeowners, all have been able to refinance, but you can't refinance these student loans. >> yeah. i mean, that's the worst thing. remember, they got in the student loan business because that old ugly private sector was taking advantage of people. well, oh, my gosh. the minute they did this wonderful thing for students, the loans doubled, the interest rates are almost two and three% higher than if you had a morality, and of course, the worst thing of all, you can't refinance these things. why? because the government owns these things. they won't let you refinance them. the private sector would do that in a heart beat. that's why they've got to get out. >> brenda: i don't know, jonas. the government is making some money on that. it seems like a pretty good business for the government. there's some that say that. >> that's their only cash machine. are you talking about turning it

off? give it to wamu or they're gone. give it to wells fargo and citi group. there are too many student loans. the private sector will encourage these loans just as much at just as high a rate. it's not going to go away with some sort of a cap on how much you can borrow. there is a scandal there. my student loans from business school are 3.13%. these kids are playing 7% in graduate school. interest rates are lower today than they were when i was in business school. the president wants to fix that. before '06 it was lower. congress got involved, set the rates arbitrarily high, haven't adjusted, and that's hosing these students. the solution isn't getting out of the way and letting a private bank take on that 8% loan. >> sure it is. >> it's to limit the amount that they borrow so they don't get in over their head and get the rate to a more realistic level and sll make a little money for the government along the way. >> brenda: isn't getting the private banks into this going to help, gary b.? >> i would think so. i would think one of the reasons that, you know, when john kicked off the segment, he said the

students are leaving with so much debt. college tuition, room and board, is so high right now. why is it so high? because students have easy access to money it flows right through to the college. they continue to raise their tuition much faster than the rate of inflation. you know, brenda, when your kids go to college, i'm willing to bet you're going to spend, probably be on the hook for over half a million dollars for just one of your kids. it's astronomical. what's the average kid spending now, close to 100 or 120,000 for four years? that's tuition wise, so if it went to the private sector, it would be more competitive. even if you think there's going to be, as jonas said, the the se amount of money out there, the government needs to get out of this business. this is like the mortgage. the government is saying college education, better than other uses of the money. by the way, it's the taxpayer that's on the hook for that nearly $1 trillion in debt, a lot of which won't be paid back. if it's in the private sector, the taxpayer is not on the hook for it. >> brenda: steve, are you buying

that? do you think the government should be in this business? >> absolutely not. banks should not have the responsibility for deciding who goes to college, and if they are the sole financers of student loans, that's exactly what would happen. of course the number of loans doubled because they can't turn people down. if you have five or six thousand dollar credit card, a bank might say no, you can't go to college. don't turn it over to banks of. >> brenda: gary b., take him on. go ahead. >> the banks are deciding who can pay and who can't. why is going to college a right? >> exactly. >> hold on a second. if you can't afford to go to harvard, that's a choice. either harvard wants you or you go to a community college or something else. i went to a private bank for my loan when i went to graduate school, you know. >> me, too. >> lehigh doesn't say oh, my gosh, you know what? if we can't pay, we'll pay your bill. it was up to me to pay the bill

and i found a way. >> we're acting like the private lending industry doesn't let people get in too much debt. that's their whole business model. >> they send letters in the mail to everybody to take out a loan against their home to go on vacation or put a hot tub in your house. to think they're not going to let students borrow two or three hundred thousand dollars to get a worthless degree is ridiculous. they'll get bailed out when they don't pay. that's the last word. did you hear this? it's good that companies are profitable. i want you to be profitable. i want you to be taking a little more home in your paycheck. >> brenda: he still wants to spread the wealth around, but will his plan to do it take more from your paycheck instead? everyone's retirement dream is different; how we get there is not. we're americans. we work. we plan.

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this is what america's ceo is telling american businesses. >> corporate profits have sky rocketed to an all-time high. now we've got to make sure that middle class wages and incomes are going up, too. because families all across america haven't seen their take home pay rise for nearly a decade. that's the next phase. it's good that companies are profitable. i want you to be profitable. i want you to be taking a little more home in your paycheck. >> brenda: gary b., you heard the president. what say you? >> it's mindbogling how little he knows about how business works. look, whether he likes it ornltr not, people and companies are co

mod tees. companies offer a wage that attracts the best peek they can get. if the wage is too low, they don't get the people they want. if the wage is too high, they waste money. more importantly, what does they think happens to the profits? one, by the way, he should want more profits. that's more tax revenue for the government to take in. two, the companies don't have a wheel barrow and take it over to fort knox. they use the profit to invest and build bigger companies and expand and grow and guess what? hire more people down the line. if they had less profits, they wouldn't be able to grow and less people would be hired. >> brenda: well, steve, the thinking is if you pay workers more, they will spend more and we'll see this kind of multiplier effect. >> absolutely. it's a real drag on our economy that the only thing the president said that's wrong is it hasn't been 10 years, it's been 40 years. real wages have not risen over the last two generations, and we have 50% of the work force living from paycheck to paycheck. now, when you have that, people

can't invest. they can't spend. a little bit of wage inflation would be good for this economy. >> brenda: yeah, but john, should the president be telling american businesses what to do? >> no. absolutely not, because he doesn't know what to do himself. look. we've got no national energy plan. we have no tax plan. we have no immigration plan. we have no long-term plan on anything. that guy's telling some profitable company like apple how to run their business? look. his jobs plan was hey, you guys who have money, we want you to hire people you don't need. if you're good mr. america, you're going to get paid very well, i assure you. to tell people to pay more, income equality is the worst it's been. this doesn't solve it. it's preposterous. >> brenda: okay. jonas? >> he' he's telling, but he's nt forcing. he doesn't want to raise the corporate tax rate. we've seen the top fifth income over the wealth and the bottom fourth shrink. there's been none of this wealth

redistribution that everyone fears. it's been the opposite. it's been sort of like it was under clinton. it's very hard to stop this. it's very hard to make a company pay more and earn less. even with the tax code, getting back to gary's point. when they lower the taxes, it lowers their wages. >> brenda: i've got to let toby get in there. go ahead. >> i'm always amazed that he misses the economic point. the economic point is we did $800 billion of stimulus. how did that wealth spread around? we did almost $70 billion of green energy. we spread the wealth around the. how did that work out? he has the ability to absolutely forget every spreading the wealth around idea that's worked or not worked and then the ones that do work like, for instance, cutting wages or cutting taxes, he thinks don't work. he's sort of got it all backwards. it's like a weird thing. >> brenda: okay. final word. thanks, guys. thanks to steve for joining us. what's this?

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>> brenda: predictions. toby, you're in the hot seat. go for it. >> those baggage fees are killing people. bayous air. you'll make some money. >> brenda: gary b., bull or bear? >> i'm b one. >> brenda: your prediction? >> the cw is the first network to stream to apple tv. up 50% over the next year. >> brenda: john, bull or bear on that? >> i'm a bear. >> brenda: what's your prediction, sir? >> my prediction is wal-mart is getting hurt by the payroll tax. they say i hate that, but family dollar will benefit, up 20% in a year. >> jonas, what do you think? i'm a bear. >> brenda: your prediction. >> huge solar players reminding us there's energy to tap in the

sun. you can get ahead of the next alternative energy bubble. >> brenda: okay, toby, you like a tan. bull or bear on that. >> too late, baby, i'm a bear. neil cavuto on business up next. neil, take it way. >> neil: growing scandal surrounding the white house. grillings of white house officials plastered across the news. sounds like what's going on today, but naturally they're not talking about what's going on four decades ago to the day. hi, everyone, and welcome. i'm neil cavuto. talk about a little bit of deja vu. it's the date of the watergate hearings beginnings, beaming into tvs across america, captivating a nation and crippling a market. walwall street saw a lot of red during that summer. with several hearings on tap for this summer, are we about to see another great 1970 show all over again? to ben stein, charles payne, dagen mcdowell