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 texa