Of these tax changes. So no net cost to the government over time. And you have peoples income up about 10 and additional jobs so more people are working. Now that is close to a free lunch as you can get. And thats the damage done by the current tax system. All the neutral tax systems are a means of getting the three layers of tax. Some are collected at business level. Some collected only at retail. Now my favorite, the personal expenditure tax is put down your income subtract your savings pay tax and whats left . That way each year you sit down and fill out a form and you say, they took what . And then you dont vote for them again. Where laz the retail sales tax might be nickelled and dimed and you may not save all your sales receipts and realize what has happened to you. But there are conveniences of doing it one way or the other. We have to take a look at those. These are all efforts to get away from the horrible horrible effects of the income tax and moving to a more sensible neutral tax base. Thats where the flat tax is really the flat part. You can have one rate. You can have two rates. But the base is flat. Were not putting one layer on consumption and other the others. And ill take any of them that can get me there. Although i have my preferences. But thats really the focus we need to have. Thank you. Good morning. I want to thank david for putting this together. If you havent already realized from the first few speakers this morning, our current income tax system sucks. Best takeaway message. Its an economic term, yeah. Its called sucks. The United States tax code severely distorts market decisions and the allocation of resources. It impedes Economic Growth and potential tax revenue. Youre hearing a lot now as were getting into the president ial election cycle and theres a lot of agreement on the need for tax reform but theres no consensus between or within parties among the the specific elements of reform. Even among republican parties theres differences on where you should focus. But luckily policymakers need not fly blind when looking at what is a good, efficient fair tax system. Weve been talking about that this morning. Keep in mind a few things as you walk through various ideas. One, a tax reform should be simple. Weve been talking about this all morning. The complexity makes it difficult and costly to comply with. It also makes it easy to scam. Congress should make it simple and fair as possible to reduce compliance cost. It should also be equitable. We talked about the idea of equity. Policies intended to benefit or penalize select individuals or groups riddle the tax code. These result in a measurable, unintended consequences. Now fairness is subjective. Tax fairness reduces the number of provisions that favor one group and not the other. And the doctor talked about this this morning as well. A plan should be efficient. Economists like efficiency. But because the tax code alters market decisions and areas such as work saving, investment and job creation, it impedes the Economic Growth and reduces tax potential. It also should be predictable. The negative effects are resulting not just from what it does today but from what it may do in the future. Such deters Economic Growth, in environments conducted to growth thus increasing revenues. And requires a tax code that provides near and longterm ive often jumped because of the tax extenders you hear about that we now have a permanent state of temporary tax policy. Thats not efficient for Economic Growth. Now, weve also heard this morning about how congress prefer a broad tax base with lower marginal rates. Because the tax rates drive the decision at the margin of what to do next. You do more work more saving or me leisure because its too high. Broader its more efficient because youre not treating some forms different than others, then reating a bias. A little caveat. I say generally before a Broader Tax Base but base broadening shouldnt be a tradeoff for other provisions and evade an attempt to achieve revenue neutrality to achieve the cost of capital. For example, increasing the length of depreciation schedules, thats not a good tradeoff for lower rates. Personally, we shouldnt focus so much on neutrality at all. One of the points steve mention is the scoring. I dont want dynamic scoring debate either, but i can tell you we should focus on the right policy provisions free Economic Growth competitiveness and job creation. The taxes we have today does not do that. So we need to actually get rid of it, forget about the revenue impact and realize that down the road this will pay for itself. The current United States tax road severely distorts market decisions in the allocation of resources. Tax code hampers job creation, impedes Economic Growth and ref knew potential, and throughout the discussion today, also please keep in mind where i teach my students only people pay taxes. If you take one thing away from tax policy, corporations dont pay taxes. People pay taxes. If you tax a corporation, youre either going to have a lower rate of return for investors. Youre going to have higher taxes on the profits or higher prices on products. So consumer pays for it. Or youre actually going to be taxing play boar in the fact the labor price you pay will be lower because that money is going to taxes. They may develop countries now reducing the Corporate Tax rate and restructuring 2 Corporate Tax systems to make them simpler. The United States federal government, though appears to be taking the opposite approach. Ill note some states throughout the United States are lowerring the Corporate Tax rates and offering competitive tax brackets on businesses. You can see that in the southern states. Numerous provisions increase uncertainty and cost for american business. This drives competitive profit corporations to minimize their tax exposure and defer income overseas. And for some to reincorporate outside the u. S. Even worse some u. S. Companies take out date in order to maintain income overseas to avoid the high u. S. Tax rate. Unless we reform them, this country would fall further behind in global competitiveness. With the tax rate so much higher than other countries, u. S. Companies must tourn to accounts. Sometimes the Tax Department is the most profitable section of the business. Companies use engineering tactics using tax code preferences. Through various transfer pricing arrangements, accountants can improve their competitiveness. The more you tax capital or labor, the less you get. It also makes clear that incentives matter. Again, its sort of a fundamental in your gut and you know it. If you tax something, you get less of it. If theyre trying to raise the covert tax rate, they obviously want less corporations. If theyre trying to raise the Capital Gains rate, they must obviously want less capital and less savings. If theyre trying to raise marginal tax rates they think were working too much and should take more time off and not work. Thats the basic theory of economics. Unfortunately some people dont seem to get it. The one thing i say is we should not be raising taxes. Ft tax rates should be lowering them. Too many about what should we do . Should we raise them . Lower them . How do we have a better tax system that encourages jobs and growth, and how do we focus on the spending side . And how do you get the best revenue system and spending system that meets your demands . Right now we have politicians saying were going to tax you here. We should say what are you willing to pay in taxes . Heres what it is. Were not having that discussion today. Just to give you an idea. Economic plans that looked at the tax increase of 1 of gdp reduces output over the next three years by nearly 3 . So raising taxes results in less economic output. I also want to point out tax rates. I have a chart. Ill put it up so cspan can see it. And basically realize the excess burden square rate of the tax rate. So you get gains from reproductions and harmful losses from raising tax rates. If you double the tax rate, you dont just double the deadweight loss. It can be three, four, five times greater. Steve got this when he talks about the rate reductions in capital accumulation we can do on the tax code. Doesnt give you a one for one trade off. Its a multiplier. And thats really important to keep in mind. I would also sort of point out that there are a lot of legislative efforts right now attempting to treatment the symptoms and not the cause. Those that are doomed to fail and exacerbate the existing problems. Policies trying to penalize them will only exacerbate the problems and move them more so overseas. They will continue to languish and will create troublesome results with further loss in american jobs. And further erosion of the u. S. Corporate tax base. And again harmful tax policies with savings, investment job creation really hurt Economic Growth. To sum up and conclude, there is broad consensus amongst Academic Research as to which key policies are the most likely to promote solid, sustainable kmik zbrout Economic Growth and revenues. Again, the more you tax capital labor, the less you get. It also makes clear incentives matter. Lower the corporate rate, the individual rate on both sides. One of the keys to successful individual reform is to move away from a spending system that depends on an easily manipulative tax system. This will increase stability and lead to added employment and perhaps most likely increase revenues. As steve, dan and the doctor pointed out as well we should have no double taxation. Lastly, reduce bad incentives. Tax policy is essential. No more temporary tax policy. Lets make it permanent. Lets make a reform and do that for the sake of the country, Economic Growth, and for revenues. Thank you. [ applause ] good morning. David introduced me as your recovering tax attorney, and you probably think that im going to start off with a lawyer joke, and i know a lot of them. But i quit using them because i found two things to be true one is, it irritated any lawyers in the audience and the second is everybody else thought they were true. So i am here as a proponent and have been if here for 25 years of getting rid of the income tax system we now have both corporate and personal, gift tax and estate tax and going to a National Retail sales tax. It started off in the 90s with the tosei and schafer plan. Then we went to a fair tax a 23 National Retail sales tax on goods and services. And you can learn about it if you want at fairtax. Org. I wont get into economics. But i think were all taxing about taxing consumption. Im talking about what i consider the purest way of taxing consumption, which is at the retail level. Now a couple of things have been said that i really believe are important. Most of the other, in fact all of the other plans, which involve using the income tax as a part of a way to do this require each of you in the audience to file a return. I dont know if you remember he used to hold up his i debated him his onepage tax return. And i would hold up mine. And individuals dont have a tax return. Corporations no longer have the deadweight cost of having to comply with either a bat, which theyre doing in europe, or the income tax. Because again this is a tax collected by retail providers of goods and services. Not the people that provide the inputs. As far as Economic Growth. I think the Economic Growth from all of these plans are very similar. Im not an economist. But i can read and ive read each of these gentlemen have written very well on the topic. And i believe theres no question were going to have more Economic Growth. I think one of the issues that we probably should look at, and it was brought up because it was one of my initial problems with the consumption tax back in the 80s. And that was complexity. Because in the 80s i was, as a tax attorney, very, very, very concerned with the enormous cost to Economic Growth and the sanity of my clients from the tax code. And i was in favor of a flat tax, and ive stayed that way and until i started coming to washington and following what congress did. And i began to believe that may not be the way to go because any kind of income tax can be tinningerred with. But one of the issues back in the 80s also was compliance. It really a concern because you have a lot of people e vating the income tax, but do you want a system evaded even more easily . Well, times have changed. Over 90 of retail sails are actually collected by anybody want to take a guess . Less than 10 of merchants. 90 . Think about it a minute. The walmarts, the targets the the amazon. Com. All of these people are collecting, were most of these, for all of them, its an accounting situation thats most important. Theyre going to collect the tax. You look at the ore thing you say, well, what about the remainder of that 90 . Well, back in the 90s. Ernie, the vice chairman of the board of equalization in california, which is the agency that collects the tax was telling me they were getting in the high 90s of compliance. I thought that was interesting. Last friday i had a conversation with george runner, now in the same position. Hes the vice chairman. He sent me because i asked him. I said send me an email. I would like to get this. But he says they collect 98 pblgt of the sales tax thats owed in california. 98 . Do i think a retail sales tax of 23 is going to result in the same time of collection . Probably not. Youre probably going to have a lot more incentive to evade. But its still going to be much better than the income tax we presently have, and thats one of the issues that i have. When i was talking to some of the members here who were advocating. Not on this panel, but members of congress about the flat income tax as a vehicle for getting to the consumption tax. My question was, what are you doing to do about evasion. When you run a set of estimates of revenue what is your evasion factor . Plet me just ask you a quick question. How many people in the room in the last six months or year have lad an opportunity or know of with unto get a service or a product at a substantial discount for cash . How many . H anybody . Okay. Some hands are going up. Do you think thats because its easier economically . Accounting wise . No. In most of the groups i speak to almost all the hands go up. And they all say no. Its theyre not paying tax. They found a way to do it. Theres a study on the the underground at the university of wisconsin in madison where they talk about in 2000 its either 2010 or 2011, they felt like as much as 10 billion being evaded. And you look at it and you say, okay, im going to bring the rate down. Im going to bring it down to 15 , 20 from where it is. That will make it more attractive from the people evading to come in. Except, theres one calculation left out. And that is if you have an evasion of the income tax, youre also evading Social Security. Youre also evading any state taxes. So if you bring the rate down to 20 , and youre self employed you still got a 15. 3 Social Security tax. You could still be paying 40 . I dont think its going to reduce the invasion unless you get draconian in your enforcement, and i dont believe thats really possible today. One of the side effects of obamacare is i know a lot of people who have left corporate employment and are now contracting because they can get much better tax benefits which maybe that translates. Thats why i believe a retail sales tax makes more sense. Ive said this to curtis in a debate and ive said it to dan and others. If they were king and could guarantee that the flat tax alternative was going to stay in place for 20 years, im resigning as president and chairman, and im moving over to you. But i asked the question trying not to embarrass anybody but how many people feel that the flat tax is going to be flat in five years, and i almost never get a hand that goes up. And this is out in the, you know, im here very little compared to my time across the country. People just dont believe that its going to stay flat. And i dont believe its going to stay flat. Whereas for the retail sales tax, its more transparent, its much harder to adjust. Thank you very much. Thank you all if r coming. Its been a really good discussion. I think steve and jason and steve and dan have hit on all the topics we have hit on. I think we can sit here and talk about tax reform. I want to hit on a few things currently going on in the debate. So going back to something dan said at the beginning. He said that theres broad acceptance that tax rates matters. And thats largely true. But there are actually people out there who push back against that simple proposition. Go back a couple years ago. Congressional retail service. Right in the middle of the election said tax rates dont matter. Pretty bluntly said that. When a few of us pushed back on that to say this is pretty common sense and well understood that tax rates do matter, we were accused of being antiscience and not really being true to research. And i got attacked as well. It was kind of bizarro world. We were stating fact and being told that wasnt true. Lt it basically says the the accumulation of capital is going to lead to the ruination of capitalism. And in a way that he proposed to deal with that was to levy tax rates. Taxing capitol over 100 . So there are people out there who will disagree where the simple propositions. And thats why its always important to keep making the case that tax rates do matter. They have an impact. And its best to keep them low. One other thing thats come up through many of the presentations is there is no one way to get to a consumption tax. You can get there a lot of different ways. So youll see a lot. This happens during president ial campaigns. Theres a lot of fighting among conservatives. What is the best plan. Part of the effort weve been doing here is to educate conservatives and the public and lawmakers that we dont have to be fighting so much over what the actual plan, what it looks like on the surface. I like to compare it to a software program. They all execute the same functions. Whether its a new tax, a business transfer tax or some hybrid to combine elements of all those taxes. Theyre all getting us to the sa