Correction: Tennessee deficit is $1.2 Billion, not just $1.2
How laffable to read this tripe 3 years later. California's tax collections are up, deficits are down, and business is booming. On the other hand, states like Kansas that followed Laffer's advice, are hurting in jobs and running massive deficits. In fact Tennesse, Laffer's promised land is running a $1.2 budget deficit.
I used to be thankful for such marvelous statements of common sense, but that was back when they could be heard above the roaring of the leftist wind.
Art: This is what the Democrats want you to do. You think they pay a price when accomplished people leave the state? Poverty is the objective, not a condition to be avoided.
Once you see Democrats in that light it all makes sense. Democrats pay almost no price when the economy is bad - in fact they get more votes, since poor people vote Democratic in the mistaken belief that Democrats are for poor people. True enough, if the goal is to stay poor.
And yes, Democrats do give benefits to poor people, but just enough so that they can maintain, not enough to get them out of poverty. And, of course, the money will one day run out, but to these people that does not matter one bit. Power at any price is the goal.
Welcome to the Democratic Party - the most corrupt organization on planet Earth.
If you have any doubts about it, look at the African American experience with the Democratic Party the last 50 years. After 50 years of Democratic leadership shouldn't blacks be worried about excessive wealth? Didn't happen - instead many if not most blacks are part of a permanent underclass. And the way things are arranged to even talk about that fact is equivalent to racism - Democratic media has conditioned the public to stay silent on how poorly blacks have done the last 50 years.
So...what would you say about an organization that has arranged it so that blacks live in a state of high crime, low education, shattered families and governmental dependence? To me what it is is consistent with Democrats prior activity as the party of slavery, the KKK, "separate but equal", lynchings and Jim Crow.
One day a leader will arise in the black community who will see things for what they are and demand appointment of a truth commission to look at the modern day holocaust committed by Democrats. That day can't happen soon enough - or are we to lose more generations?
I don’t know what the heck Lafer is talking about in regards to business taxes. Net sales is not the difference between sales and production costs. That is gross profit. What the heck is value added? How about defining that. How about not using the term at all. If production costs, which are directly variable expenses, are deducted from sales to apply the tax to it, what is to stop companies from using full absorption cost accounting to move overhead into production costs. He fails to be clear and it leaves me cold to his idea.
"What California needs is another Reagon [sic]" In fact, government spending rose substantially under his two terms as governor. Fees on higher ed abounded, and a theoretical game changer to California politics on the order of Prop 13 had not yet existed. Prop 13 merely shuffled the tax burden down the road, leaving a host of inequities between rich and poor homeowners. In the 60's, Cali essentially bootstrapped on an unavoidably growing economy and a favored role in national defense, overall demographic growth, and Green Giant vegetables and the TV industry.
Now I fear that public debt and low growth overall have put the entire country beyond the benefit of Supply Side Economics. Unless the US as a whole changes, there will be no star players among the States -- only a concoction of Spains, Italies, and Greeces. This may be to the good, as we need some scapegoats for our national failure.
What you and other conservative pundits fail to realize is that this is the intended strategy of the communists, yes, that's right, communists!They will move on to another and then another state until all of America is broke! The communists ruin the middleclass as they are now doing, by state and federal tax policies. You and the rest of the intellectual pundits better start manning up and using the term communism if you really are seriuous about saving this dying Republic; until then, you are just blowing smoke as far as I am concerned!
My family did as Art Laffer did...after 40 years of owning CA property we" voted with our feet"and relocated to the Nashville area of TN. I am very happy to be out of that liberal cesspool called CA.
This method seems fair for all Californians, young & old, small business & big corporations. I know many who left Ca. because they could no longer deal with the rising costs in this state. I live in So. Cal & if I could afford to move, sell my property, etc. I'd leave too. Our state is now called "The Dead Zone" for a good reason. Liberals, progressives, democrats & unions are destroying this state. Something needs to be done, now. Good luck trying to get Brown to listen. He's terrified of the union thugs.
Mr. Art Laffer,
I believe my Simplified Tax is better than the complicated VAT. The below Tax Plan needs to get scored by the CBO, something they will only do through Congress request. Can you help?
Simple Solution To HealthCare Taxes Jobs
6/14/2012 -- Universal Medicare (UMC) that covers every resident who has a valid Social Security #, not the EIN# that is abused by illegals and meant solely for business, would be covered under Medicare as it exists today, thus adding nothing to the cost of support structure and bureaucracy. Co-pay percentage would be based on ability to pay determined by mandatory tax filing (also to be used as an annual census tool) by everyone even those with ZERO income. To pay for UMC; as everything must be paid for as there is no free lunch except by recipients of bribes, notably politicians, corrupt business, those gaming the system, and criminals.
There would be a 3% National Sales Tax (NST) on EVERYTHING with NO exemptions, not even for government, church, charity, education, medical, food, clothing, manufacturing, resale, private or public organizations, imports, and cash or assets transferred out of the country, including corporate transfers to foreign subsidiaries.
Government's 3% NST paid would go to retiring National Debt and not recycled back into current spendable budget. UMC would automatically reduce tremendous cost of Medicaid mandated to the States that are basically bankrupt themselves. California is presently facing a $16 Billion shortfall. Purely financial transactions like loans, mortgages, and rent, would not be subject to the 3% NST.
The proposed plan equalizes all personal and business income with no special treatment or exemptions for ANY type of income. No income would be tax-exempt. Personal and business taxes would be based on the same graduated new tax table with a maximum tax rate or 20% under which the Effective Tax Rate on Taxable Income of $100,000 is 2.74%; the Effective Tax Rate on Taxable Income of $1 Million is 7.47%; the Effective Tax Rate on Taxable Income of $1 Billion is 19.88%.
The magic is that the 48% who pay no federal income tax and the 24% who pay no payroll tax would help pull the fiscal wagon. Under the table income and drug monies are eventually spent and then taxed, and would thus become contributors to fiscal sanity...and the FAIRNESS politicians are so fond of.
According to analysis of Attorney Lanny Davis, who helped defend President Bill Clinton from impeachment proceedings, in a 7/6/10 article published in The Hill wrote that there were $755 Trillion in total transactions in the U.S. in 2008; $443 Trillion if exempting stock transactions. Accordingly NST on stock market transactions should be 1/2 of 1%, beating the International Movement toward the inevitability of this type of tax.
Mr. Davis’ figures indicate that fiscal and UMC social costs recommended by this current plan can be paid for if everyone is part of the 3% solution. Another welcome by-product would be jobs-jobs-jobs because of the absolute low fixed cost of doing business, with a graduated 20% max on personal, business, and corporate income.
Allocation of the 3% NST should be the first 1% toward Budget, the second 1% toward debt reduction, and the third 1% for Universal Medicare for all legal residents of the U.S.
Those unable to pay the 3% NST could be helped by existing social service agencies that could add the 3% to the food stamp allotment and other appropriate credits, along with other agencies and charities that would bridge this cost. Charities would not be burdened with massive poverty costs whose limited resources would be stretched out for the most good, filling the gap instead of building the entire bridge.
Request the entire 5 page 80 point tax & social plan by contacting:
Albert Maslar CPA (Retired)
128 Huron Ave.
Absecon, NJ 08201-2022
What California needs is another Reagon. He had the guts to try a plan like this.
Mostly agreed, but the one big thing that puts the state government in the red is the collusion of the Democrat Party with the public sector unions. The unions "donate" to the Democrats and the Democrats ( leftist at that ) see that the unions get sweetheart deals from the state. Jerry Brown is a Democrat, and so he is reluctant to attack his support base.
Thank you...I know this to me true, however I don't agree with the (except for sin taxes, which exist to modify behavior rather than to raise revenue). To me, that's deals with personal freedom of choice...You're right on target with the rest of your article!
California has very high personal income tax rates. Nevada and Texas have no personal income tax. During the 10 years ending in 2009, California had a net outflow to Texas of 225,000 people with $4.5 billion in adjusted gross income (AGI) and a net outflow to Nevada of 198,000 people with $6.6 billion in AGI. www.newsandopinions.net
Would that tax be sufficient to support the outrageous public sector pensions? (even if they were "fair"?)
Mr Laffer, no potential solution to California's problems will be realistic until the state controls the illegal alien problem. As long as illegal aliens take and don't contribute no tax reform will save California.
If you could find a way to tax the money sent
South of the Border monthly, earned in the
underground economy there might be
some hope for California.
Taxes will NEVER go down. Not in the aggregate and not individually.
The reasons are two fold: first, politicians will not reduce their personal power - the ability to affect people and companies via tax law; second, the inherent jealousy of the "have nots" as demonstrated by the ultimatum game (see: http://en.wikipedia.org/wiki/Ultimatum_game).
Dr. Laffer: The "9.5% Only Tax" (In Several of my works and lawsuits) does prove the point, but, specifically, the problem in California is one that was predicted "before it happened" (and still uncorrected and ongoing).....anything you can do to get the Unification Science Upgrades implemented, that are the only thing that could-eliminate Relativity-Based-Social-Security's deficit in the 1980s, is appreciated.....the first exam is at www.JoinUSRecovery.Blogspot.com...SUPPORT AND DEFENSE OF THE CONSTITUTION (ARTICLE 18 OF THE 1776 DECLARATION OF INDEPENDENCE, OUR FIRST CONSTITUTION) IS A ROUGH SIMPLIFICATION.....Thanks for the back-up....RCCFM: Always(C): Dr. Eric Who's Who Physician (Ph.D. & Public Health)....Everything else will triple the crime and debt rates, beware....
Great idea not just for California but the United States - but the Democratic parasites in California would never agree to it. Too many vested interest profit by the incomprehensible tax code.
So even though it is a good idea, even though it would work, even though the people would support it, it won't get enacted.
And that's why people are fed up with government.
I like the concept but the details fall short: "...including on home mortgages; and rent on one’s primary residence, to remove the current system’s preference for homeowners." If you want to remove the current system's prefernce for homeowners just eliminate the deduction. Don't add new deductions. Flat means flat.
What happened to the “Benefit Principle” as the gas tax? People that didn’t own cars didn’t want to pay for roads for those that did. When a person that doesn’t ride a bike sees a bike path being built for those that do, he is now going to want the government to pay for what he wants. Without limitations, Art’s formula is the starting point of a bigger government which will lead to what California has now.
Californian voters continue to elect politicians that maintain their horrible situation. And surrounding states are all too happy to embrace all the jobs, businesses and professionals that are fleeing California. We've got a win-win situation for everyone's interests, and Jerry Brown is the perfect person to maintain California's direction.
I don't mind the high taxes in CA, I consider them to be sort of a gatekeeper in my coastal town. I don't want more growth because it means more yuppies and longer lines at Panera Bread. All yuppies are good for is creating lines everywhere and bidding up property values. I actually hope Google, Apple and others leave this state because all they do is employ egg heads who clog up the roads with their recumbent bikes. They can go and take their tightly wound lifestyles with them. I think Jerry Brown wants the same thing. Our state could be more laid back, sort of like Kauai or something, only with better Mexican food.
I also don't understand why anyone needs to make more than 250k a year. That's just being a greed bag. I mean look at what Pimco did to Orange County with all those idiots running around. I would be more than happy to have Texas take these people out of my state. They can go sit in air conditioning 24/7 in some soulless Mcmansion in Plano. The kind of houses that have that ghastly brick arch above the front door. They can sit on those places all day and pop opiates and get diabetes from their unhealthy lifestyles.
Art Laffer doesn't get it, he only considers happiness being able to have the McMansion with the overpriced Range Rover in the garage. That's fine, I'm glad he left. Has he ever thought that maybe we don't want more growth here? It may be too much of a shock to his system to think that.
But that would mean cutting spending, and thus cutting government jobs. Now why would our corrupt plutocracy in Sacramento want to decrease their pay and lay off bureaucrats? This state is only for the very rich, who can afford to live here, and the massive welfare state, with half of Californians on the government dole.
May I address yet another issue that makes California a less-than-ideal place in which to work?
I am a teacher, 35 years old, with teaching certifications in Chemistry, Physics, Mathematics and (of all things)Special Education. I have 13 years of teaching experience. I was looking to move off the eastern seaboard to a state with milder winters, and I briefly entertained the notion of teaching in one of California's larger school districts.
That's when I was informed that I'd need to take three courses in Teaching English Language Learners. And three more courses in teaching students with autism. (I hold an Ed.D. in Special Ed)THEN I would have to train in a new "pro gay" curriculum the district is instituting in response to a motion from Governor Brown. Because my Special Ed credential is a "Generalist" credential (i.e., I am trained to deal with all levels of pupil disabilities,) I'd have to return to a California college and take still MORE coursework in order to declare a "specialty" field. Until then, I could only get a "preliminary" credential -which expires in five years.
There was more - a LOT more - I had to do before being deemed worthy to teach in an inner-city barrio school - but I had already reached the end of my rope. I accepted a position in Arizona and told one California school district administrator exactly what he could do with his million-and-one inane requirements.
The Golden State is so over-regulated with its non-stop employment hurdles and its pc directives, I can't help wondering if it realizes how truly unattractive it is to educated, hard-working denizens from other states. Also, I can't help wondering if it even gives a damn.
Your logical and well thought-out system is far too sensible for California. It removes the demagoguery of appealing to the lower 2/3 of wage earners by 'making the rich pay their fair share' (an amount that, apparently reaches infinitely upward), and precludes their ability to game the tax structure to the benefit or detriment of one or another niche industry.
No, no: you are far too sensible for your former home state. Tennessee's gain is their loss. Thank you for your very informative article.
I was with you, Arthur, all the way up until you comment on the "sin tax." Is this insistence on retention of the sin tax based on a theocratic/religious notion that government must control people's behavior? Why is that the religious right and their friends who complain so much about the power of "big government" still feel that they must do Jesus' work and SAVE PEOPLE. Let people do what they want, however stupid, please. Allow those who skydive, ride motorcycles without helments,smoke, drink, use drugs, pay a premium on insurance and wherever else applicable.
We Easterners don't mind Californians moving to escape the communist state they created, but you all ought not bring that sort of idealism to our communities.
You are so stupid, it is off the charts. All the folks you mentioned that "take $ off the books" go out and buy gas & a 100 other things that brings in TAX REVENUE. You dummy.
Must be nice to live in Delusional Land with Obama and his Green cronies. :)
The higher the taxes, the less tax $ comes in. The lower the rate, the coffers fill to overflow. Obama is a delusional Marxist & so is everyone that works for him.
how and why did you choose tennesse over FL, TX alaska, etc? weather?
Slowly bur surely , Caly is driving out all but the EBT crack heads and the pien pensant dopes , and the faster the better . The country as a whole will be better off . Let the entrepeneurs , the job creators , emigrate to Texas , Utah or wherever , just make them leave their failed politics at the border .
How would this figure into a national tax revision called the 1-2-3 No Federal Tax Plan which would introduce allocating federal taxes back to the states based on census and eliminate the federal income tax on businesses and individuals? It allows each state the opportunity to decide for itself how to raise their share of the federal tax.
Flat tax on Income still skips trillions of dollars in off-the-books income or illegal operations income. Example: the money you paid to the house painter, handy man, gardener, accountant, attorney, consignment shop, etc. etc. In short, all monies paid where one does not follow it at the end of the year with a 1099 is unreported and hence potentially untaxed income making your share high enough to cover those cheating. Then the sex trades, drug sales, stolen cars/merchandise, internet sales revenue: all untaxed revenue--free loaders on the taxpayers. Any Income Tax will not capture all these who ride free on the backs of the tax payers!
To see my full, dreary fact sheet comparing CA with the other states, go to:
CA has the 3rd highest state unemployment rate. (April, 2012) – 10.9%. National unemployment rate 8.1%. National unemployment rate not including CA is only 7.7%, making the CA unemployment rate 41.2% higher than the average of the other 49 states. http://www.bls.gov/web/laus/laumstrk.htm
Few folks realize that the CA income tax is even more "progressive" than the federal income tax. Here's an op-ed I wrote with some surprising examples.
The liberals’ Kim Kardashian con job on California income taxes
by Richard Rider
27 March, 2012
In a recent publicity campaign, liberals made the beautiful but smarmy Kim Kardashian their (unwilling) poster child for raising the state millionaires' tax to over 13 percent. Their pitch is that millionaires pay only 1 percent more in income taxes than middle-class California taxpayers.
Granted, the current marginal tax bracket difference is sometimes 1 percent ---- 10.3 percent marginal rate over $1 million versus the 9.3 percent marginal tax rate the California upper middle class pays on the top portion of their income.
But in terms of percent of taxes paid, the spread is far larger. Sadly, given the fiscal innumeracy of the press, this left-wing misrepresentation was well received.
Even The Wall Street Journal editorial on the topic missed the tax math involved. I didn't. I cranked out the figures, taking into consideration the standard deduction, tax tables and personal tax credits.
As it turns out, the progressives' claim that in California state income tax paid by the rich is "just 1 percent more" than the middle class is utter nonsense.
A single California taxpayer with no kids making $60,000 pays 5.0 percent of his income in California income taxes, assuming just a standard deduction. If they made $80K, then they'd pay 6.1 percent. If they made $100K, they'd pay 6.8 percent, much less than the 9.3 percent tax the liberals claim the middle class pays.
But look at the family picture ---- a married couple with two minor kids. If they make $50,000 and take only the standard deduction (supposing they can't or don't itemize), they pay only 0.1 percent of it in income tax.
Yes, that's correct: 0.1 percent or $73.
What if they make $60,000? They pay 0.8 percent in income tax ---- $498.
If the couple make $80K? They pay 2.1 percent.
$100K? They pay 3.3 percent ---- far less than the 9.3 percent the tax raisers love to claim the middle class pays in income tax.
As these figures demonstrate, the California income tax ---- considering the rates, exemptions and tax credits ---- is extremely progressive.
Many other states charge more income tax than California to people making less than $100K. It's the "rich" who already get soaked in the Golden State.
My sources? The California Franchise Tax Board website.
One other point: The tax touters assume that few, if any, rich folks will relocate because of an almost 30 percent increase in their state tax rate (from 10.3 percent to 13.3 percent). If the measure passes, we will be 21% higher than the 2nd highest state (Hawaii), 34% higher than the third highest state (Oregon), and a heck of a lot higher than all the rest – including six states with zero income tax.
The really rich (especially the wealthy "investor class" who live off their investment income and pensions) already have second and third homes elsewhere. It requires jumping through a number of tax compliance hoops, but with this huge tax incentive, it's reasonable to assume that many of California's rich will establish their legal residence elsewhere ---- no longer paying any California income tax – and spending far less time and money in our deteriorating state.
In addition, far fewer really rich people will move to California. Losing the taxes is bad enough, but the overall economic loss to the state would be a bigger blow.
Ironically, it's quite likely that materialistic Kim Kardashian will be one of the first multimillionaires to relocate outside California -- if she hasn't done so already.
To read the original NORTH COUNTY TIMES column (with a few spirited comments) go to: http://www.nctimes.com/news/opinion/commentary/forum-the-phony-kim-kardashian-tax-ploy/article_15f5710b-a5da-5a05-88f1-16fd759698b3.html#ixzz1qKwOd28r
California has the 2nd worst state income tax in the nation. 9.3% tax bracket starts at $48,029 for people filing as individuals. 10.3% tax starts at $1,000,000.
Governor Brown is putting on the ballot a prop to change the “millionaires’ tax” to 13.3%, starting at $500,000 – including capital gains. If approved, CA will be by far #1 in income tax rates. We will be 21% higher than the 2nd highest state (Hawaii), 34% higher than the third highest state (Oregon), and a heck of a lot higher than all the rest – including seven states with zero income tax. http://www.taxfoundation.org/files/bp59_es.pdf
And then there's the competing "Munger" millionaires' tax prop -- 15.3% as to Brown's "modest" 13.3%. And remember, capital gains is taxed the same as ordinary income in California.
Actually California has the SECOND highest state income tax -- not the fourth. Granted, some might want to count the NY combined state and city tax as "a state."
California may be beyond repair.
As an aside, North Dakota voters turned down a measure that would have eliminated property tax, by a wide margin.
Do you have any thoughts on that?
It'd never work.
Political power requires exemptions and exclusions, bought for by campaign contributions.
A flat tax rate is way too uniform and fair.