Or daily business. Time magazine listed arthur in an article, the centurys greatest minds. Los Angeles Times listed arthur in an article a dozen who shaped the 80s. Business week discussing the most destruct stiff ideas destructive ideas in the la85 years. Anything that has to do with disruption should have arthur listed. That brought a question. I want to propose a question. What does Arthur Laffer and Marilyn Monroe have in common . They both achieved their celebrity status because of their curves. [laughter] im not going to ask for a vote of hands to see which curve you suspect 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 reverse. You were actually a little funnier than i was. Any of you find this weather unusual at all . I mean, im from cleveland ohio, and i dont know if you saw the lakeeffect theyre hitting records. I think in buffalo got up to 75inches of snow in the fall. I remember lock ago anybody remember jack kemp . [applause] i remember jack. I called jack. He was in buffalo. And i asked him, hey, jack, whats the weather like there in buffalo . And he said, oh art its clear and still. The snow clear up to your ass and its still coming down. So let me do you mind if i have a little fun with the people here today . Its a fun topic. Especially after the election on november 4th. Especially after the election of november 4th. Ill say it three four times. Wasnt that amazing . And its not only the senate and the house, but did any see the governorships . I mean my goodness. All seven taxcutting republican governors won reelection. Sam brownback john kashich, rick snyder mitch daniels. Not mitch mike pence. They get theyre the same person. Just i dont know how they do that. Its just then did you look at the tax inincreasing 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 anyone notice illinois . We took that one. [applause] i mean, this is reading when you look at it, economics really does matter. The ones we didnt take we didnt take california, but jerry brown did lose super majorities in both the assembly and the senate. We did not take minnesota, mark dayton was reelected. But he did take the house in minnesota in New Hampshire we did not take we took back the house in New Hampshire. Its amazing what is going on. If you look at the number of states represented senate and house, we picked up a huge number of that as well. It is just amazing itch thought id just go through some of the economics of states if thats all right. The book, yall got the book. But i wanted to go through with you. What 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 all over all of your heads today. If you have two locations, a. And b. If you raise taxes in b. And you lower them in a. Produces and manufacturers and people are going to move from, to . Aim going over your heads on this one . I had more fun doing this with steve and travis brown, but its really fun let me just go through a couple of them and then ill go through california. I still have a thing on for california. I lived most of my life there and i was in the governors council, and when he turned to the dark side, schwarzenegger i decided to get out of dodge. I still miss him. Schwarzenegger was very entertaining. In fact, i remember the first time i met with him on that. I was having breakfast with him at his house in l. A. I met him a couple of times. But i didnt know him well at all. And i went up there to have breakfast with him, and id heard his sharp wit was 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 and said arthur why are you economists so short . I said, where did that come from . Seriously. He said, no, no, cant be more than 46 tall and you are you remind me of danny devito. I starred with him in twins. So i never took that tack again. If i can, the book health of states. 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, end up with connecticut in 1991. Normal states. If you look at them you have maine, rhode island, you have connecticut, new jersey you have West Virginia, you have pennsylvania ohio you have michigan, you have indiana, you have illinois, and then you have nebraska. These are normal states. What i did in this chapter, we took the performance of those states, the three years before the introduced the income tax. You al with me . Looked at the primary metrics, population, labor force, all of these variables relative to the rest of the nation. So we standardized by the size of the nation. Then looked at the same metrics, including, by the way state and local taxes. Then 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 bay lot. I mean, michigan, for example, went from 5. 2 of the u. S. To 2. 7 . I mean, that is a collapse with the way, anyone know who introduced the income tax in michigan was . Romney. Sorry, just had to mention that. Just for the crowd here. If you look at my home state of ohio i was born, raised in ohio mitchell mom and dad were both born and raised in ohio. I four of my grandparents all four of my grandparents were bosh and raised in northeastern ohio. Stenseven out of eight of my greatgrandparents, i go back and visit my family at the Lakeview Cemetery in cleveland; have you seen cleveland . Its a bomb shelter. Its a disaster. I could go on. New jersey just think of new jersey. Anybody here from new jersey . New jersey in 1965, had neither an income tax nor a sales tax. Neither one. One of the Fastest Growing states in the nation. People from wherever moving to new jersey and they had balanced budget. When my student was governor four and a half year ago, guy named jon corzine just a cstudent and after reading all his stuff, im not even sure youre into c. I mean, had the highest property taxes, highest sales taxes, slowest growing state, people leaving like rats of a ship. West virginia, you cant make a state poorer than West Virginia. Yes, you can. Four more teeth fell out. Just joking. Thats not fair is it . But its funny anyway. You know, if you look at the provision of Public Services. If we were sit neglect capital of one of this stated that introduced an income tax, what would a debate be like . Those who are against the income tax would argue it will hurt growth output, employment and production. Those in favor of the income tax would argue, we need the schools, we need the highways worked in the roads. So what did was decide to take it on the next step and look at the provision of Public Services and ill go through one in a little more detail. So i looked at the number of fulltime equivalent employees in education, all the different Public Services at the state and local level we have detailed records. If you look at the number of fulltime equivalent employees per 10,000 of population in these states, you can see what happened to the input. There are some of these provision of Public Services where you can measure the output. Department of education, does scores. At fourth grade and eighth grade. Theyre all the same test close to nation. I if you look at these 11 states with income tax, only three of the states had improvements in their Public Services. Only three. And they were by little, bitty tiny amounts. Eight states actually declined in the provision of Public Service relative to the rest of the nation, and six of the states declined by a lot. That is chapter one the fall from grace and you can go through the details. I then did the nine members of the brotherhood of the ring i am hip im modern, im into it. What i did was i then looked at the comparison of those nine states with no earned income tax, compared with the nine states with the highest income tax rates. If you look at those states, its incredible the difference. The nine states with no earned income tax kicked the living bee jeaners out of the highest income tax rate states. Really do. In everybody single category including tax revenue growing. Its amazing. You can take out the oil states, which we did as well in the chapter, and even without oilproducing states, the nine states with no earned income tax did way better than the nine states. We looked at Public Services, and corporate rates all of these variables of theres 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 took these data back, 50 years. Im looking at the tenyear growth differential. Not one single year in the last 40 years im using tenyear rates not one single year in which the zero income tax rate states didnt outperform the highest income tax rate states the same number of states. It just is incredible, the evidence there. Then looked at one called piling on, the next chapter, which looks at the 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. The righttowork states 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. The next chapter, which was all mine the metrics chapter. I dare you to read it. If did a bib logograph of 55 articles on the academic journals, all with the same results across the board. Then looked at give under caesar. We have irs data on states from 1992 on the reported year 1993 on to 20102011. If you look at where people are moving and where theyre moving to and what their income levels are, its astounding. We use one of these variables, which i didnt include in the book here which is on the estate tax or the death tax in states. Tennessee had an estate tax, and florida doesnt. And what i did in the estate tax paper was i looked at the number of states federal estate tax filings in florida per 100,000 population compared to in the number of estates, federal estate tax filings in tennessee her 1 been thousand, 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. People really do move. I was reminded of im from ohio so any of your remember howard metten balm . He was mr. Death tax himself. He was like 912 years old when he died. Six months before he died, he decided to move to florida because there was no i just its funny, but the thing is true is his behavior was perfect. His words were bad. He did the right thing by moving to florida just before. He shouldnt have been arguing in favor of an estate tax all those years before that. What i want to too, the last chapter of the book is au contraire. I go through arguments and discuss which you might find fun i had fun doing it. What i want to go through with you is texas and california. Here are the two giants of the planet. Texas, and california. 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 you 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 but tax rates 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 al with me . You have to believe me. Theres no income tax in texas. Theres a 13. 5 in california. Theres no Capital Gains tack i could go on. If you take all of those together california, marginal tax rates on Economic Activity 65 higher than they are in california. Point number one. Now, once you look at this 65 higher marginal tax rate in california than it is in texas, you know theyre going to be some leaks. Back in the lateen 40s, 50s , we used to be working on cars. Back then they measured horse power of cars at the engine. And of course as you know the horsepower is at the engine measure. You want to know what the horsepower is on the rear axle, and theres something called their parasitic leakage, and you look at that and look at tax rates. If you have tax rates in california, 65 higher than they are in texas to go from tax rates to tax revenues, you have all sorts of parasitic leakages. Number one the Unemployment Rate in california is much higher than texas. Parasitic leakage the participation rates in texass higher than in california. Parasitic leakage. If you look at rich people, rich peopling are moving out of california and into texas. Parasitic leakage. If you look at tax returns in california, people hire lawyersaccountants, deferred income specialists, favor grabbers in the whole process. So that their income is sheltered. Parasitic leakage. You can all see the parasitic leakages 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. Are you with me . Then you have the next parasitic leakage. Between tax revenues and public spending. 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 al follow me there . I was in the board of lion homes, just as an example. Because of all the revelations and restrictions and requirements in california if we decide we need to build more homes, we had to look for a huge piece of property, rancho this that or the other, 2,000 3,000 acres, then yaw have go toe go through a permitting process that takes two years before you start anything. Once you started something, then it would take you a number of years to develop it through. Texas, very very different. Prevailing wage. Cow dont have that in texas. You do in california. School teachers are all unionized in california. They arent in texas. In fact, from 1975 to the present, School Teachers in california have put on 170 statewide strikes. In texas, if youre a School Teacher and you strike, you immediately lose your license to teach. There are none. Its amazing. But there are all these leakages in the process. If you go from revenues as 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 even. 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. That is state and local government. To the actual provision of Public Services. Let me just go through a little fun stuff with you here. On california and on texas. Texas. Has less poverty shares 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 Rate there. Here we go. Once you have the spending. California pays its educators 40 more for fulltime equivalent employees than does texas. Remember spending is the same in each state. Public welfare employees in california make over 56,000 per year to texas 37,000 a year, 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 correction employees 93 more than does texas. California pays its state legislators 95,000 per year. Now, all full disclosure they have cut their pay from 113,000 in deference to the weak economy in california. Texas pays its legislators 7,200 a year. Now, on the provision of Public Services, i just got to go 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 cost taxpayers 47,421 per year our 129 per day. 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 theyre the fourth worst in the nation thats true but thats their best performance in the last 25 years. California usually is the second low nest the nation, only being beaten by mississippi or louisiana, once by new mexico. Now theyre fourth worst in the nation. Texas is 29th highest in the nation. The California Teacher i mentioned that of the five mega states california texas, new york, illinois and florida, california, according to the department of education, has the lowest educationa