The life of a war photographer, a history of the spanish civil war and much more. For a complete Television Schedule visit booktv. Org. Booktv, 48 hours of nonfiction books and authors. Television for serious readers. He said im short, fat old grouchy and go to bed at 8 00. [laughter] now, that had nothing to do with his intellectual capacity or his energy. I suspect arthur visited more cities and countries last this year than collectively any table here. Intellectually, the wall street journal listed arthur in a feature article entitled a gallery of the greatest people who influenced our daily business. Time magazine listed arthur in an article the centurys greatest minds. The Los Angeles Times listed arthur in an article, a dozen who shaped the 80s. Businessweek listed arthur in a special edition celebrating their 85th anniversary discussing the most disruptive ideas in the last 85 years. Anything that has to do with disruption should have arthur listed. That brought a question i want to propose to you a question with regard to arthur. What does Arthur Laffer and Marilyn Monroe have in common . [laughter] they both achieved their celebrity status because of their curves. [laughter] im not going to ask for hands to see which curve you respect for arthur. Out of due respect for arthur. Arthur laffer. [applause] . Thank you very much tom. I had the pleasure of introducing tom not long ago when he got his award here from the Manhattan Institute so it was a real pleasure in reare verse. You were reverse. You were actually a little bit funnier than i was. Just a little bit funnier. Any of you find this weather unusual at all . I mean im from cleveland ohio, and i dont know if you saw the lake effect theyre hitting all sorts of records. I think in buffalo it got up to 75 inches of snow in the fall. I remember long ago any of you remember jack kemp . [applause] remember jack . I remember jack i called jack he was in buffalo, and i asked him, hey, jack, whats weather like there in buffalo and he said oh, art, its clear and still. The snows clear up to your ass and its still coming down. [laughter] so let me if i can have a little fun. Do you mind if i have a little fun with the people here today . Is it all right . Its a fun topic, especially after the election on november 4th. [applause] especially after the election of november 4th. Im going to say it about three or four times just to make sure we i mean wasnt that amazing . [applause] you know, its not only the senate and the house, but did any of you see the governorships . I mean my goodness. I mean, all seven taxcutting republican governors won reelection. Sam brownback john kasich, rick snyder, you know Mitch Daniels i mean, not mitch mike pence. Theyre the same person they just switch i dont know i how they do that. But its just and then did you look at the tax increasing governors . Three out of six of them lost their seats. We took massachusetts, the governorship of massachusetts. Pretty amazing. If you look at what happened in maryland, we took the governorship there. Did any of you notice illinois . We took that one. [applause] i mean, this is really incredible. I mean, when you look at it, economics really does matter. I mean, the ones we didnt take, we didnt take california okay but jerry brown did lose supermajorities in both the assembly and the senate. We did not take minnesota, mark dayton was reelected, but we did take the house in minnesota. In New Hampshire we did not take hasan won reelection but we took back the house in New Hampshire. Its amazing whats going on if you look at the number of state representatives, nat and house, we picked senate and house we picked up a huge number of that as well. I thought id just go through some of the economics of states if thats all right. The book yall got the book or Something Like that a, but i wanted to go through it with you. What a i tried to do, what we tried to do in this book was just put economics on a state level clearly and focused. And i hope im not going over all of your heads today. If you have two locations, a and b, if you raise taxes in b and you lower em in a producers and manufacturers and people are going to move from to. Am i going way over your heads on this one . [laughter] you know, i had more fun doing this with steve and rick and with travis brown, but its really fun to let me just go through a couple, and then im going to go through california with you because i really still have a thing on for california seeing i lived there most of my life, and finally i was on governors council. And when he turned to the darked side schwarzenegger, i decided id get out of dodge. I still miss him. He was very entertaining. In fact, i remember the first time i met with him. I was having breakfast with him up at his house in l. A. And id met him a couple of times, but i didnt know him well at all. Went up there to have breakfast with him, and id heard that his sharp wit was really amazing, so i decided the best defense would be an aggressive offense. So i went up there and i said, governor, i just want to tell you very clearly how pleased i am to be with you today. And its just a real honor to be with you. But the truth of the matter is i hope youre a good governor and do really well. And with that he responded to me, he said arthur, why are you clearthinking economists so short . I said, well where did that come from . I mean seriously. He said, no no, its total [inaudible] Milton Friedman, he cant be more than four feet three inches tall, ask you arthur, you remind me of danny devito. You know, i starred with him in twins, so i never took that tack again. [laughter] but let me if i can the book the wealth of states. First chapter, first big chapter starts with the fall from grace. There have been 11 states in the United States over the last 65 years that have introduced the income tax. So what we thought wed do in this chapter is take a look at what happened to those 11 states. It started off with West Virginia in 1961, it ended up with connecticut in 1991. Normal states if you look at em. Youve got maine, youve got rhode island, youve got connecticut, youve got new jersey youve got West Virginia youve got pennsylvania ohio, you have michigan, you have indiana, you have illinois and then you have nebraska. I mean these are normal states. What i did many this chapter is we in this chapter is we took the performance of those states the three years before they introduced the income tax. You all with me . Looked at the primary metrics population, labor force, all of these variables relative to the rest of the nation. So we standard used by the standardized by the size of the nation. Then looked at the same metrics including, by the way, state and local taxes that looked at the same metrics in the last two years. If you look at each of those 11 states, literally with not one exception, every single one of those states declined as a share of the u. S. Economy. Not one exception. And some of them declined by a lot. I mean michigan, for example went from 5. 2 of the u. S. To 2. 7 . I mean, thats a collapse. By the way did anyone know who introduced the income tax in michigan was . Romney. Sorry, i just had to mention that just for the crowd here. If you look at my home state of ohio, i mean i was born and raised in ohio, my mom and dad were both raised in ohio all four of my grandparents were born and raised in northeastern ohio. I go back and visit all my family at Lakeview Cemetery in cleveland. And i sometimes wander have you seen clear cleveland . Its a bomb shelter. Its a disaster. New jersey. Just think of new jersey. My of you from new jersey here . Any of you from new jersey here . I mean, new jersey in 1965 new jersey had neither an income tax, nor a sales tax. Neither one. One of the Fastest Growing state in the nation people from everywhere moving into new jersey, and they had a balanced budget. You know when [inaudible] was governor four and a half years ago a guy named jon corzine, student of mine in chicago by the way, full disclosure c student [laughter] and after reading all the stuff on mf global, im not even sure youre in the c but they have the highest income taxes slowest growing state with a huge budget deficit. I mean, you could go on and on. West virginia you cant make a state poorer than West Virginia. Yes, you can. [laughter] four more teeth fell out. [laughter] just joking. Thats not, thats not fair is it . But its funny. Anyway, you know if you look at the provision of Public Service why . If we were sitting in the capital of one of these states that introduced an income tax and you were in the debate, what would the debate be like . Those against the income tax itll hurt growth and production. Those who were in favor, what would they argue . We need the schools, the highways, the roads, all those things. So i decided to take it on the next step and look at the provision of Public Services in these states and im going to go through one in a little more detail with you. So i looked at fulltime employees in education at the state and local level. We have detailed records on all these things. If you look at the fulltime employees per 10,000 of the population of these states, you can see whats happened to the inputs. There are some of these provision of Public Services where you can actually measure the outputs. Department of education, for example, does nape scores. At fourth grade and eighth grade, english and math. You can compare them. Theyre all the same tests across the nation. There are a lot of these. If you look at these 11 states that have introduced the income tax, only three of those states had improvements in their Public Services, only three and they were by little bitty, tiny amount. Eight states actually declined in the provision of Public Services relative to the rest of the nation. And six of those states declined by a lot. I mean thats chapter one the fall from grace, and you can go through details of all of those. I then did the nine members of the brotherhood of the ring to offset the schools, im hip, im modern, im into it. I looked at the comparison of those nine states with no income tax, compared it with the nine states with the highest income tax rates. Its incredible, the difference. The nine states with no earned income taxic kicked the tax kicked the living begeners. In every single category including tax revenue growth. Its amazing. You could take out the owl states, which we did as well in the chapter, and even without oilproducing states the states with no earned income tax did way better than the nine states with the highest we looked at Public Services in that too looked at corporate rates, all of these variables across the board. There is a huge amount of Data Available for the 50 states over the last 75 years that no one taps in any state thing. Those states without the took these data back 50 years. Now, im looking at the tenyear growth differential, there is not one single year in the last 0 year 40 years in which the zero income tax rate states didnt outperform the highest income tax the same number of states. Its just incredible the evidence there. Then looked at one could piling on, which is the next chapter that looked at all the sort of nontax things. Have any of you seen the data on right to work . If you look at the difference in the performance of states with right to work and those without right to work, its incredible, right to work with states just way outperform the forced union states. Its amazing. If you look at minimum wage of the states if you look at percentage unionization, the same results apply. I then did next chapter which was all mine when was the econometric chapter. That one i dare you to read, it bores you. But what i did do in that chapter is i did a bibliography of 55 articles on academic journals, all of them with the same results across the board. I mean then looked at give unto caesar. We have irs data on states from 1992 on. The earned income year of 1992 reported year 93 on to 2010 2011. If you look at where people are moving and where theyre moving to and what their income levels are, its astounding. I mean we used one of these variables which we didnt include in the book which is on the estate tax or the death tax many states. Tennessee had an estate tax and florida, of course, doesnt. What i did in the estate tax paper was i looked at the number of state finish of federal estate tax filings in florida per 100,000 population compared to the number of federal estate tax filings in tennessee per 100,000 and then the size of the estates. Florida has twice as many filings per 100,000 than does tennessee, and theyre twice as large. Duh. I mean, you know people really do move. I was reminded im from ohio so do any of you remember Howard Metzenbaum . He was mr. Death tax himself that was the favorite tax he had. He was like 912 years old when he died. Six years before he died he decided to move to florida. [laughter] now, its funny, but the thing thats true is his behavior was perfect. His words were bad. I mean he did the right thing by moving to florida just before he just shouldnt have been arguing in favor of an estate tax all those years before that a. The last chapter of the book i go against all these arguments and i sort of discuss which you might find fun, in fact, i really had fun doing it. What i really want to go through with you is texas and california. Here are the two giants of the planet. Texas and california. And if you look at texas and california, i went through and looked at all of the taxes on income in both states. And there are i think in california i think i ended up with Something Like 1500 separate taxes before i stopped. I wasnt at the end of the taxes. There was still a lot more to go. But i stopped there. If you look at all of the tax rates there and youre going to have to just believe me on this, tax rates in california on income are higher than they are in texas but theyre not only higher, the tax rate, the effective marginal tax rate on a unit of income in california is about 65 higher than the effective marginal tax rate on a unit of income in texas. You all with me . You have to believe me. Theres no income tax in texas. Theres 13. 5 in california. Theres no Capital Gains taxes, i could go but if you take all of those together california marginal tax rates on Economic Activity t are about 65 higher than they are in california. All right . Point number one. Once you look at the 65 higher marginal tax rate in california than it is in texas, you know there are going to be some leakages. I dont know if any of you remember back in the late 40s, early 50s we used to be working on cars and back then they used to mash horsepower of measure horsepower of cars at the engine. And, of course, as you know, its not the effective measure. Really what you want to know is what the horsepower is on the ear axle rear axel. So im going to take that concept of a parasitic leakage and look at tax rates the same. If youve got tax rates in california 65 higher than they are in texas to go from tax rates to tax revenues youve got all sorts of parasitic leakages in the process. Number one the Unemployment Rate in californias much higher than it is in texas, parasitic leakage. The participation rates in texas are much higher than they are in california parasitic leakage. If you look at rich people, rush people are moving out rich people are moving out of and into texas. Parasitic leakage. If you look at tax returns in california people hire lawyers accountants, deferred income specialists, all these other favor grabbers in the whole process so that their income is sheltered. Parasitic leakage. You can all see the parasitic leakages that are going on there. If you go from tax rates in california being 65 higher than they are in texas this first parasitic leakage leads to tax revenues in california being about 25 higher than they are in texas as a share of gdp. State product. You with me . Then youve got the next parasitic leakage between tax revenues and public spending. And this is all state and local government. And then you have the next parasitic leakage between revenues and actual state spending on Public Services. You all follow me there . I was in the board of lion homes, just an example, because of all the regulations, ricks and finish restrictions and requirements in california, if we decided we needed to build more homes we needed to look for a huge piece of property, you know how we call hem all in california 2,000 3000 acres. Then youd have to go through a permitting process. Itd take you over two years before you could start anything. It would take you a number of years to develop it through. Texas, very, very different. Prevailing wage. You dont have that in texas. You do have it in california. Schoolteachers. Schoolteachers are all unionized in california, they arent in texas. In fact from 1975 to the present schoolteachers or in california have schoolteachers in california have put on 170 statewide strikes. In texas if youre a schoolteacher and you strike, you immediately lose your license to teach. There are none. Its sort of amazing. But there are all these sort of leakages in the process. If you go from revenues its a share of state product to spending, you have a parasitic leakage number two. 65 higher marginal tax rates in california than texas 25 higher revenues. When you get to spending, theyre dead each. Theyre dead even. Then you go to the third leakage in the process and i think ill have some fun with you on this one. The third leakage is from spending state spending thats state and local government to the actual provision of Public Services. And let me, let me just go through a little fun stuff with you here. On california and on texas. The texas. Less poverty as a shower of its population 16. 5 than does california which has 23. 5 . California has the highest poverty rate of any state in the nation. As i mentioned to you, unemployment but here we go. Once you have the spending. California pays its educators 40 more per fulltime equivalent employee than does texas. Now, remember, pending is the same spending is the same in each state. Public welfare employees in california makeover 56,000 to texas 37,000 a year, a 52 premium. California pays its hospital employees 53 more than does texas. California pays its Police Protection employees 70 more than does texas. California pays its highway employees 76 more than does texas. California pays its Fire Protection employees 86 more than does texas. California pays its protection employees corrections employees 93 more than does texas. California pays its state legislators 95,000 per year. Now, in all full disclosure they have cut their pay down from 113,000 in deference to the weak economy in california. Texas pays its legislators 7,200 a year. [laughter] now, on the provision of Public Services i just gotta go will through this with you. The annual cost of a prisoner held in texas is 21,390 or 58. 60 a day. You with me . In california the equivalent prisoner costs taxpayers 47,421 per year or 129 per day. California builds one mile of state highway at an average cost of 265,000 while one mile of highway in texas average cost is a little over 88,000. Texas employs 345 fulltime equivalent employees in educators for every 10,000 of population whereas california employs 231 fulltime equivalent employees per 10,000 of population. The u. S. Average is 286. As measured by the u. S. Department of education California Student test scores are the fourth worst in the nation. And, by the way, they are the fourth worst in the nation thats true. But thats their best performance in the last 25 years. California usually is the Second Lowest in the nation only being beaten by louisiana or mississippi in alternative years, once by new mexico. But now theyre fourth worst in the nation. California texas scores are 29th highest in the nation. The california teachers oh, i mentioned that. Of the five mega states california texas illinois, and florida, california, according to the department of education has lowest educational test scores whereas texas has by far the highest. Texas employs more Police Protection employees 28. 9 versus 26. 4. Texas has far more prisoners this is one that really got me. I dont get it. Texas has far more prisoners per 100,000 of population, 923 prisoners per 100,000 population than does california which has only 621. Prisoners per now, what would count for that . I sort of view all people the same and their proclivity for you know skullduggery and all sorts of criminal activitiesing with the same activities being the same. I dont understand why texas has 50 more prisoners than california, but they do. Maybe the doobies, i dont know, they dont go after em in california. I dont know what it is. But then the next one here. California prisons are currently running at 75 over designed capacity. Now, that means that a prison that is designed to have 100 people in california has 175 people. Texas prisons have 15 below design capacity. If you, in fact the Supreme Court has ordered california, as you all know, that they have to get rid of these they have to get down to 137. 5 , you know theyre down to only murderers theyre letting go murderers, rapists i mean, its just shocking. I guess the Supreme Court gave them a stay on this a little bit ago. Texas has more corrections employees per 10,000 of population than does california. Texas has almost 30 more highway employees per population than does california. Texas ranked 23rd in the nation in state Road Conditions whereas california ranked dead last. Now, ive got to be in full disclosure to give you the counter piece. Theres one piece of evidence where california way outperforms texas, and forgive me for saving this to last. California has 74 more Public Welfare employees per 10,000 in population. [laughter] than does texas. And they pay those welfare employees 52 per per more than does texas. You know when you look at this the one thing that pops out to me in this book that really came through x this came through Nourial Roubini i was debating him on intelligence squared and he said laffer, i can concede all your crap on lower taxes leading to better but frankly, i dont give a damn can. I care about the quality of life. What we can do to make our quality of life higher. So im willing to pay less truth of the matter is in the ranges were talking about, the quality of life is directly aligned with the growth in state output employment product and prosperity. There is those states that cut their tax rates, that increase their Economic Growth in the range of policies where we have them right now, their performances in the provision of Public Services also improves relative to the rest of the nation. And with that ill throw it open for questions. [applause] professor laffer ill let him field the questions but when he acknowledges you, please wait for the microphone to get to you so we can all hear your question. Great talk, thank you, professor. Californias still somewhat anomalous in this respect many entrepreneurs and many Silicon ValleyBusiness Leaders that we talk to still sing the praises of their corner of california. Are they in denial, or are they enjoying some shangri la that is not open to others . Yeah. The question is there are a lot of people that stay in california. A lot of them are very wealthy a lot of them are entrepreneurs. Californias wonderful. I mean, to be real honest i love it. I told some people here when i left california and went to nashville, i had a problem going back with the auditors and all that stuff, i had to put pictures, water color pictures on my walls of palm trees and dancing girls and beaches. I played beach boy music in the background for three years. [laughter] i mean californias spectacular. Thats why its so interesting to do the comparison. Once the threeyear statute of limitations, i can now go back and really enjoy california without taxes. But these guys, you know they do have a great life. And, you know from my standpoint i could have stayed in california. I can afford the taxes and i a lot of and a lot of these people say, i can afford it, i dont want to leave the lifestyle, thats it. Theres a lot else in life besides state and local economics. The reason i focus on that is because thats what the government has as its key role to play. They cant change the sunshine, the mountains, the beaches, all of that stuff. But what you can change is whether you how fracking or not. California doesnt allow fracking, texas does. California has far more reserves underground than does texas but texas has them and produces wealth out of them. Its amazing. But when you lock at this another look at this, another wonderful thing about california is tax shelters do really well in california. Homes, unrealized Capital Gains are a tax shelter. If youve ever watched the price of houses in california going way up, its sort of like the clearland clinic and cleeve cland State University. Its a hovel boards everywhere, guys with brown paper bags and then all of a sudden you see the Cleveland Clinic beautiful building. Cleveland State University which i always put an sic afterwards, no education in cleveland, believe me. Theyre all doing well. And why . Theyre 501 c 3 s. Taxexempt activities do really well in high tax environments. And in california your one tax aexempt activity is owning a home, owning a building because you get the unrealized Capital Gains. So theres a lot else going on besides just taxes. But look at the migration patterns from california. California was a larger share of the u. S. Ten years ago than it is today. And its decline is happening faster and faster. If you look at the time series of california when we did prop 13 and we got rid of the we indexed the income tax, the spending limit, you couldnt believe the growth in california from 1970 through 1990. And then all of a sudden came prop 98, all the taxes, all that stuff came in x the growth just stopped. We were adding, i mean, in california we were adding a San Francisco a year in the state of california. In that 12year period. It was just incredible. And then it just stopped. And it stayed stopped. Any questions over here . Well get the microphone there. You comment on new york can you comment on new york with a high tax structure, what you see as the future as far as moving the people and everything else, especially with the new estate tax . Yeah. The daily news, what was the one yesterday, butch . Whatever, i had an editorial in your new york paper here. Not the New York Times. [laughter] theyre silent. I send the paper in, and theres no response. But the news and in new york youve got to, you know, just the clearest sign of whats going on in new york is they have start up new york. Start up new york, that program . If you fit into the right categories, you get tax free there. Thats a clear sign that they understand taxes matter. If you look at the migration of personal income from states from 92, 93 to the present okay . Those . New york is right at the very bottom. I mean, new york is a devastatingly declining region of the u. S. And its wealth is leaving. I go through all of those numbers. I remember a dear friend wrote a piece in 1974 when your tacks are even higher than they are now. Its true, they were. And he wrote the poor little rich man about the new yorker who goes through all of his taxes in 1974 and finally decided to buy a taxexempt bond instead of buying a new business. But that is exactly whats happening in new york. And its really very very sad because this is the citadel of American Society today. Theres no place that represents capitalism and americas preeminence than new york city and youre squandering it. By the way, we have plenty of room for all of you in tennessee. [laughter] i mean, its really fun. Let me just joke but, you know i paid for my house with my first years tax savings. [laughter] finish without a mortgage. Sure. Is there, are there any data about states or municipalities that have done the reverse of this fall from grace that have with enough time passed to test whether or not yeah. One state has done that. One state has reversed it. Now, a number of states have cut their tax rates. As i mentioned, new york has. Under kerry, when you had your governor kerry, he cut hi really was pretty good. One state has gone from an income tax state to a zero tax state, and that was alaska. They did it with the discovery of the oil. You know, they kept the Corporate Tax, but they did get rid of the income tax in alaska. Alaskas output growth is exclusively related to hydrocarbons. Same thing with north dakota, same thing with wyoming. There are about four or five states that have really very large Extraction Industries. Very teeny, tiny populations and very large Extraction Industries so they really dominate the numbers if you let em stay in. But hydrocarbons especially oil, really make a difference and thats alaska. Its the only one. Now, there are a couple of states that have really tried to really move forward on this. I worked back in 1990 and 1991 where we were going to get rid of the income tax. We did it by a bill every year just to make sure the numbers came in so you didnt do it one year with an automatic couldnt if the revenues didnt come in, we would have gotten a lot of pushback. We tried to do it with eight bill going to zero. We had babbitt, me couple and finish. [inaudible] before us. Five years into this program, i mean, it was one of the high taxed states in the nation, arizona was. It missed all the booms of the 80s, and we were just coming on, and we were just going to do the last three years of that when [inaudible] was indicted federally, convicted and sent to prison. And needless to say, that put a crimp in our proposals going forward. But now i got a call yesterday from jon kyl whos the new governor a guy named doocy. And doocy said lets reignite that engine and seep and see if we cant be the first state to get rid of the income tax. Who knows . We might get arizona. There are a bunch of states that have done the tax cuts. Now, examples im giving you here with basically anecdotal, nine highest, nine lowest. They really are illustrative of whats going on. Its not misleading. But i took the crosssection analysis and did the econometrics analysis, its just solid. Every single state every single year, and you just look at those numbers, and you can see. I mean, the results just fire out of them. Okay. Right there. Dr. Laffer, if i could ask you to switch to the federal level sure. And you were given a choice of three federal taxes to reduce, which would be your top three . I think the progress i income tax progressive income tax is the single worst tax ever. Major tax. I think the estate tax is disgusting beyond belief. Pleasure i mean here you are, you earned your money after tax, you can take that money, and you can go to vegas, you can carouse, you can gamble, you can drink and you can smoke. Federal government says god bless you, go for it. But if you want to give it to your kids and family, they tax you up to 45 of the margin. I know of no tax singularly more disgusting than the estate tax. The progress pif income tax is pretty close. Its the exact antithesis, and it leads to very vulgar behavior. Can i do one if i can with you . And i dont mean to pick on hes probably a good friend of all of yours, forgive me, this french guy from nebraska, whats his name . Buffet . Warren buffett . [laughter] let me, if i can, Warren Buffett. Do any of you remember the letter he sent in to the New York Times . I pay less in taxes than my secretary. Do you remember that letter . He said, in fact, i have 21 people on my staff, and i pay less in taxes than all of em. And then he went through and made the fundamental mistake of actually saying what his percentage of income tax was. He said i pay 17. 4 of my income in tacks. Now, he includes the payroll tax which is sort of biases existence the rest of his employees against the rest of his employees but thats okay. He said i pay 17. 4 of my income, and my tax that i pay youre going to think this is a lot of money, but he said the tax as i pay are a little less than 8 million. I know you think its a lot of money, but its really not. Its only 17. 4 president of my income. Now, im a math whiz, so hold on. You got your chairs . I took the 7,934,000 whatever it was took the exact number and divided it by. 174, and i got his adjusted gross income. I then looked at that adjusted gross income, it was a little less than 40 million. Now, thats a hell of a lot of money for a year. This is 2010. You all with me on this . I said thats amazing. He made a lot of money paid a lot in taxes, and then i said well, let me go back to Chicago University of chicago and sort of look at what a persons income is. Now, i may shock you on this a little bit but a persons income according to the chicago definition, henry simon was what you spend, what you give away and the increase in your wealth. Now, think that over a little bit. What you spend is part of your income, what you give away is part of your income, and then your increase in your wealth, the three of those together comprise your income. You all follow me in that . Now, i saw warn buffetts letter in there Warren Buffetts letter, and then i went to forbes 500 and i looked at Warren Buffetts net worth. Now, its pretty easy to do Warren Buffett net worth, a Company Called berkshire hathaway. So forbes probably isnt too far off on the numbers here. The beginning of 2010 the year for which he reported the income his net worth was about 40 billion. At the end of the year his net worth was about 50 billion. So he had an increase in net worth of only 10 billion. I then went to the bill and Melinda GatesFoundation Web site, you know, i didnt want do it, i had people i dont have a computer even. But i went to the web site and looked at that, and lo and behold, that year or he gave 1. 75 billion to the bill and melinda can gates gates foundation. Bill and melinda arent there any longer theyve got the spend it in three years. If its not, theyve got to take it away, and i just thought youd find that humorous. And looked, so thats one i didnt go to his sons web site or to his daughters web site. There are two sons that have foundations that he gives to and i also didnt go the kiss counted discounted, to the insurance premiums that are discounted now and i didnt go to the difference in hone or in owning Berkshire Berkshire hathaway where you dont have to if you actually own the companies in the portfolio you would have had i didnt do any of that. And i looked at the total amount there, and i got Warren Buffetts income in 2010 as being about 12, 12. 5, maybe 13 billion from what i looked at. I went back to his taxes, a little less than 8 million and i calculated the percentage of income that he paid in taxes, and it comes out to be about sixone hundredths of 1 . What things do you think he recommended to obama . Do you think he recommended to president obama that we should tax, lets say lets say, tax free maybe the first billion you give to the bill and Melinda Gates foundation . No, of course not. He recommended raising tax rates on things he doesnt pay taxes on, and then he gets the congressional medal of honor for it. This is where you guys have to be serious. We must tax all income at a single rate from dollar one to dollar end and stop. [applause] and youve got to do it on everything. I apologize to the Manhattan Institute. I love you guys, youre wonderful, but there should never be another 501 c 3 in history. So were grandfathered in . What you were already given with. [laughter] what you should do is get rid of all of these things. I did jerry browns flat tax. You guys dont think a flat tax works. You dont think people like it. In 1992 i did jerry browns flat tax which we got rid of all federal taxes, all of em. We got rid of the income tax, the Corporate Tax all payroll taxes, both employer and employee. We got rid of the gift tacks, we got rid of the Capital Gains taxes, got rid of excise taxes, medicare taxes, medicaid taxes, got rid of tariffs got rid of all that crap. Well with one exception. We kept something called syntaxes. Now, syntaxes are i guess we americans dont like drunk b guys smoking while they shoot each other, you know . [laughter] but syntax is a little bitty, tiny tax. If you get rid after of all of those taxes where your tax bill is the lowest high, you could replace all federal taxes today with a flat rate tax on personal unadjusted Growth Income and a flat rate tax on Business Net Sales go ahead call it value added. You could do that at a rate of 11. 8 static revenueneutral no laffer curve effect none of that. Can you imagine what this country would look like today if we had a flat federal income tax of 12 and a flat federal valueadded tax of 12 and thats it . I mean, you know, you wouldnt even have to file a tax return for gods sakes. Your company owes you 100 they send you 88, and its the off. If you mow your neighbors lawn for 10, its true youre going to have to write a check for 1. 20. That is where we should go on growth. That is literally the way. I think we have time for one or two more quick questions. Gentleman back there. You know, in addition to the legislative taxes that you describe, there are now systems of shadow taxation whether in the form of College Financial aid programs or the effects of Health Insurance subsidies, and i wonder if you studied the effects on behavior of those sort of shadow tax systems and whether theyre significant additions. Yeah, they are. Theyre very significant. All of these other taxes i mean, the one i love is obamacare. I think obamacares really wonderful, you know . Whenever someone gives away valuable resources in unlimited quantities, they go bankrupt. I hope im not going over your heads on this one. [laughter] but, you know, you have got to go back to Milton Friedman on this. And i miss Milton Friedman for two reasons. One, i miss him terribly for good economics. And the other reason i miss him terribly is whenever i followed him on the podium, i could actually raise the microphone. [laughter] joking. But he said it correctly he said all Government Spending is taxation. The tooth fairy does not work at the u. S. Treasury any longer. Father christmas is not an american tradition. Whenever the government spends, its taxation. Whenever they spend money, they have to take it from someone else. Government spending is taxation. And you can go through all of these processes all of the different ways in which they distort the marketplace, and they all have very, very powerful effects. The problem is its gotten so arcane and complicated and convoluted that you cant even tell whats going on really. Its really very hard to figure out what the degree of intervention to change income is. I mean its in damn[ city bus tickets. I mean its in every darn thing there is. One more . One more quick question. Yep. George austin. Arthur, in your longstanding and careful analysis of states relative to Public Policy the subject at hand here, so what are the political implications two years from now in 016 of 2016 of the messages that were sent by the electorate in our country, and for the record which you 95 plus accurately predicted in terms of Public Policy, tax policy and politics two years from now . The neatest thing about being my age 74 going on 75 youve actually experienced some things in life. And ive got to the el you, ive been to to tell you, ive been to this bash i cue before. The first time was in the late 70s early 80s with you know who. At that time it smelled really good with, but i didnt know what it was. I think we are literally in 1978 again. The Election Results are in theyre solid. I think the corner has been turned. When i look at, when i look at 2016, i think youre going to have a supply side president. It dud does not it does not have to be a republican people. It doesnt have to be a democrat a liberal conservative leftwinger, rightwinger. Its economics. And economics is all about incentives. And what we have had for the last 16 years is a redistribution of society. And whenever you redistribute income this is math now this is not ideology whenever you are redistributing income you always reduce income. The problem with picketty is he doesnt get this. Whenever you talk from someone who has more and give to someone who has less you follow me on that . By taking from the someone who has more, they have less, and their incentives to produce are reduced. By giving to someone who has less, you provided them with an alternative source of income other than working. And they too, will produce less. Whenever you redistribute income you reduce total income, and the more you redistribute, the more you reduce total income until you get to the extreme which is a Kurt Vonnegut extreme. If you have 100 redistribution you will have zero output. Just to give you the example here, if we had 100 redistribution, what we would do is we would tax everyone who makes above the average income, 100 percent of the excess. Okay . And everyone who makes below the average income we would subsidize them up to the average income. Thats the 100 redistribution model. Thats the sort of picketty model. Now, if we actually did that, if we actually taxed everyone who made above the average income 100 of the excess and subsidize everyone below the average income up to the average income i will stiptoday counselor, everyone stipulate today, counselor, everyone will be equal at zero. [laughter] now, what is happening and whats happened, i dont remember or if you remember back in the ancient days of johnson nixon, ford and carter. I used to like to refer to them as the four stooges. The largest assemblage of bipartisan ignorance probably ever put on planet earth. You know, they were redistributionists of the first order, and, of course, that led to be still my heart growth. We have had the same thing. W. Was not my favorite. Im sorry i hate to break it to you, but big spender, just i think an awful president. And obama clearly is not my favorite. [laughter] i think theyre twins, to be honest with you. But what you are in store for is a big change in the process, and ill just finish it with i used to tease the real president. I used to say, you know sir, its my professional judgment that as an economist, as a professor that you truly are a certifiable genius. [laughter] but, you know, some of my colleagues at the university dont sort of concur in my assessment of your intellectual acumen sir. In fact, some of my colleagues at the university dont think youre very bright at all. But the one thing my colleagues and i do agree upon is your one unique characteristic is your uncanny ability to select your four predecessors. Anyone following on heels of johnson, nixon ford and carter just cant look bad. [laughter] and in the same sense its really true that if reagan had been elected in 1976 and im going to tell you, he would have been a very different president than one you know and love. He really would have been. In all honesty, it took jimmy carter to create ronald reagan. And that is the truth. And in the same breath that it took jimmy carter to create ronald