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18 states running surpluses thanks to spending cuts

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    Proof tax hikes aren't the answer?

  • Duration 8:53
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But -- thousands of jobs on the chopping block this week is a time for DC to take a cue from the buy you.

Louisiana governor Bobby Jindal wants to eliminate his State's income tax and corporate tax the Republican governor saying quote.

It's time to change so people can keep more of their own money and Foster an environment where businesses want to advanced and create good paying jobs.

So how would -- pay for what with a hike in the states 4% sales tax in so -- -- says.

Let's -- this idea.

Right up to Washington DC is that right or wrong.

-- -- body -- David has been bucket of Forbes on -- let's go and focus where it.

Masters Steve forbes' Elizabeth MacDonald.

Rick -- judge every rich -- guard and Mike -- Zain and John -- -- you love this idea and you think it would be good for the whole country explain.

It.

It would be great for the whole country one of the biggest scandals of modern times is not our deficits but the fact of the federal government.

Collects 2.5 trillion on an annual basis and more.

With a consumption tax or sales tax this is the -- way that we as Americans can limit.

How much money gets to the federal government and limited more businesses would be created more jobs created plus the federal government would not be penalized in our work.

Would that not -- and we get more work and more jobs.

It sounds good it may -- on earth do you get it it sounds wonderful here's the problem I'll give you two reasons why this doesn't work and I won't even touch I'm incredibly regressive nature of this.

Problem number lol I was saved by regressive -- -- -- -- -- for more than British exactly problem number one look.

You want to put the brakes on economy and starting to come around imagine what would happen here first of all.

In order to get you to keep this revenue neutral you're looking at a twenty to 30% sales tax to replace what we will be raising -- income tax.

Add that to the state tax the governor -- -- wants to add.

30%.

Added on to the cost of -- -- -- nobody is gonna be able to afford it no one's gonna go shop but.

Steve this country is a great experiment ground in the states are the ones that experiment with ideas that might work -- the federal level.

Don't states that have eliminated income tax do better than the others.

Oh absolutely right they're nine states that don't have a personal income tax and as a whole they do far better than states with income taxes.

You -- compare for example the state of Vermont with the state in New Hampshire.

New Hampshire has no sales tax and no personal income tax it has done far better economically over time the neighboring state of Vermont which is a very yet so called progressive state.

On the national level though David I do have to put a caution you better change the constitution -- -- up with what most states have and that is both an income tax and they consumption tax.

We've got to get -- unfortunate constitution was changed the only part of the twentieth century in order to bring in the incoming had to change -- -- we're gonna get the worst of both world well Mike I was surprised noting here that you're against ideal from -- an idea for Bobby Jindal who you normally like quite a bit.

-- don't like sales taxes David simply because we've seen this experiment in Europe with bats.

There -- terrible idea they're more onerous off and then income taxes.

So and they're very sneaky -- speech particularly bats because.

They get put in it every little apple element of sales so you don't even really know what the true tax rate is -- the cost.

And gin -- program basically is to replace one source of government right revenue with another so it doesn't do what John -- he would like -- what I would like which actually reduced the amount of money that -- the government.

All right -- rich yet Milton Friedman the great free market economists didn't like sales tax at least a national sales tax does he said it worked too well.

It's too easy for governments to continue to raise money in -- and yet you're in favor of this idea why.

No I'm in favor of it at the state level the question you asked about Stephen experimentation.

Boy that's.

You know one of the beauties the United States is that we have fifty states.

And the fifty states are free to try different revenue raising methods in addition to.

I New Hampshire verses for remind you of the state of Washington -- the state of Oregon Washington has -- Income tax and it's doing quite a bit better.

-- of these things work at the state level but Milton Friedman is absolutely right.

At the national level it just wouldn't work it wouldn't work for the variety of reasons among them the constitutional problems.

We Mac is this one of those ideas that works beautifully in a state level but it doesn't translate well the federal level not I think awaits translate to the federal level I mean look I mean Aaron eggs federal income tax system as it does I like Rand -- -- that it really is a disaster.

It truly has made more liars out of American people in golf.

And what we're talking about is essentially it's -- that saves of the genocide it's especially now a system that's been simplified beyond all understanding.

Of what we're talking about it the sales tax not a bad.

-- tournament itself tax that's called the fair tax.

And what it means is yes it would hit consumption it could start at 17%.

Rick -- makes a great point those state local -- with Florida have their own sales tax systems -- -- -- -- -- and also it would -- -- make a really competitive.

Health care market but here's the problem.

The senior lobby would really lobby hard against it because the seniors -- to -- their income taxes.

And when they start spending their income into -- set a sales tax.

Boy -- -- re really upset about it.

I goes I'm Michael -- just for the sake of simplicity alone in Mac is a 100% right this last tax and tax increase that we we've had to indoor.

Makes the tax code even more complex and it was before just for the sake of simplicity don't you like this idea.

I want out flat income tax rate David that would make it simple and fair I want everyone to pay the same proportion.

Bob -- -- com.

-- taxes which gives everybody the same amount of skin in the game.

That would also slow down government spending because people with -- Wow I'm also going to be -- for this new program that's what I want all right well I know Steve's not gonna give me an argument on a flat tax but state.

The beauty -- what's happening at the state level in this country is that.

For all the messing -- so we have inside the beltway they're they're really starting to get their act together in the state level aren't -- They are indeed and indeed states that are reducing -- state income taxes are doing very well.

States that are of very good -- and -- terms of their finances look at Indiana.

Manufacturing state.

Very good governor's now well left office go to Purdue Mitch Daniel Daniel's rallies -- I -- -- -- Mike Pence and other Republican manhunt for president someday.

But Indiana is the one state in the country that got a triple -- rating cut its rating improve without an energy base because of the good finances that Mitch Daniels put him.

And rich yet you look at all these -- you look at Bobby Jindal Scott Walker from Wisconsin of course you mentioned Mike Pence Chris Christie.

Nikki Haley from down south.

There are thirty -- for all of the democratic moves in the presidential race there was a move in the opposite direction I think Republicans.

Picked up a another state so they're now thirty Republican governors in the United States.

Yeah and that point is lost some a lot of -- and -- now are seeing this yawning gap between the states that are getting there.

Fiscal house in order -- those cough cough Blue States that voted overwhelmingly for Obama.

Like Illinois California and New York there are not winning so I -- that this is going to be a wonderful experiment that is playing out.

And I -- in 2014.

People really take.

No Rick ideologically do you feel little lonely on the state level.

The only thing I feel as this remarkable gerrymandering that's been the result of that you all.

That way to thank you got to explain that what you don't think that the public willingly elected these Republican governors you know what I know I know that one and a half million more votes were cast for Democrats in congress -- they work.

For Republicans -- guess why Republicans control the house.

Because of the gerrymandering that was done by every other let's leave today not only control -- right at that house of congress but they also control the state legislators on the state level.

People seem to be for more fiscal responsibility do they not.

Yes they do when you sought in the state of Wisconsin early and kind of mid 2012 and Scott Walker faced a recall as the one governor that's faced down a recall successfully.

People like successor -- seeded Michigan you see in Wisconsin we see in other states so yes when people see good fiscal responsibility they respond positive.

Let me go back to John Tammy go for the last -- job though a lot of people say the state level this idea of switching for to it from an income taxes have sex is okay.

But not -- a national level because they don't want to give the -- that much power do you agree.

-- -- totally disagree I don't want the federal government to know how much I make my national sales tax.

Is my way of keeping my income private and it's my way of starving the government it's constantly wasting my money on things I don't want to -- It quickly it's -- have fruit believe that we forgotten that.

The United States was -- to avoid high taxation John -- is actually right it would also created economic boom because capital come pouring back into the US economy got to be.

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