You're watching...
Kanaly Trust Chairman Drew Kanaly, FTN Financial Economist Lindsey Piegza and Cato Institute’s Dan Mitchell on the tax overhaul proposed by Louisian...
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Is Louisiana governor Bobby Jindal proposing -- zero corporate tax rate personal income tax rate that is right.
Dipped zero not.
If he can pull this off Louisiana -- joins -- -- he states that are ready don't charge these taxes but here is the cat.
The trade off might be a higher sales tax from only 4% to 7% although he hasn't committed to that.
Will more states follow with a -- our money -- The -- injured now.
Chairman of now I trust -- to be exact an economist with apt here on Dan Mitchell senior fellow with the Cato Institute great to see all of you again.
True this would have been asked.
Well economics is all about incentives so what the governor trying to do is.
At least level the playing field on incentives for businesses and individuals -- really relocate to Louisiana.
So it all makes sense on paper the question is -- what can he do politically but economically he's going the right direction.
I'm Lindsay let's talk about the economics for a second and personal income tax last year he raked in two billion dollars so that's a lot of revenue to be giving up.
He hasn't gotten there at the corporate tax is very -- I think it was like half a billion dollars of setting or even less than that it was a low number.
But he's giving up a lot that personal income tax for sure there -- So.
Eight I don't.
I mean I don't know it's it's going to be -- you make that up on a sales tax that's going to be fairly aggressive.
Well you noted that its us between that short term solution in the long term prospects right now the focus in government both on the state and federal level has been the short term fix.
So really tax anyone anywhere in order to fill those budget gaps.
And maintain the status quo here's a very different kind of thinking.
The governors coming out and saying look if we can create.
-- very favorable tax environment we can bring in individuals we can bring in business.
And really see the local economy recover on a long term scale yeah we start to -- -- more long term trends in terms of growth business investment.
-- -- -- -- -- On that point because if you say that we needed to do more hiring like Lindsay saying.
Mean you look within the state their unemployment rate is actually low and has been following right now they have an unemployment rate of five point 8% of you compared that's -- the national average of seven point 8%.
Does it make it harder to make that argument that we need to not tax corporations because we need to bring jobs to our state.
I think what the governor is looking at -- the fact that he's right next door to Texas which has zero state income tax Texas has been doing very well in terms of job creation.
There are eight other states in addition to taxes that don't have a state income tax.
And I think the governor wants to make sure as the was just said in the long run that Louisiana has a more competitive environment.
To create jobs to to have higher incomes faster economic growth.
And when you look at this evidence all across the country it's very clear that states with no income taxes do grow faster and have more prosperity.
In terms of faster economic growth every year.
I -- the fight that he's gonna have politically and otherwise draw ask you I mean is obviously when you go from.
A corporate tax too -- sales tax that's incredibly regressive I mean that takes people that are.
Making the least amount of money in -- -- them ostensibly the same.
As people were making a lot of money because we are glad by -- also you know your discouraging behavior anything -- taxes what you're discouraging you want to.
Discourage consumption.
Well -- encourage savings and investment won't it but that the analysis mistaken what what everybody else is talking about on this -- -- You're you're looking for total revenue to increase so if you bring him businesses into the state.
It's it total revenue will increase so.
All this static analysis about.
Qualify eliminate this tax I lose -- revenue that that's not the correct way to analyze this the whole thing that -- involves chasing right now.
Is total revenue to the state and he believes through a more competitive.
Tax structure Louisiana compete with the likes of taxes.
As some of those neighboring states and so that's what he's up to and in bear and hunter I'd like we found that -- own national unemployment rate.
Sometimes unemployment rates is because people have left the state yeah.
Right so your total employment base is gone down he wants to get -- employment base -- -- like he does face he does face a problem with their sales taxes.
Sure very and I always there's kind of economics -- -- is talking about I mean that he's been thrown out at a federal level.
I mean first sure politicians in Washington don't believe.
That if you tax corporations -- -- tax individuals more that it discourages economic growth I mean they would just say that -- and saying oh of course it's a very different I don't think is right now in Washington.
There's this drive to Britain really -- re distribute funds from the most productive members decide to the least productive now and that's -- we continue to see but so it's going to be very difficult to get this -- that they got a federal level.
But state by state -- can be much more easily implement in terms of GAAP pro business.
Vs pro government policies but it's certainly I acted.
I continue to to emphasize what your previous -- sentiment and the idea.
And if we continue to Foster investment business growth that's gonna create more income.
And allow individuals actually ramp yeah consumption and continued to -- -- -- and go ahead Gerald.
Melissa in the last fiscal cliff today.
What did we hear about corporate income tax rates.
Just over her right now nothing yeah -- JK you know it was never discussed and why did Washington not touch it.
Because they know it's an issue of global competitiveness.
So you know how -- yeah a lot of credit de bugging you the very well we're here -- telling everybody wants to hear it can they agree Roger who -- But they think that there insane I think they just haven't gotten to yet -- unfortunately I wish that I agreed with you but I think eight I.
I think that that they're just licking their chops to get to the corporation's -- I'll give -- the last word real -- The Tax Foundation just released something today saying that Louisiana currently has a 32 out of fiftieth business climate in the United States and if governor didn't dolls reform -- -- It will go all the way up to number four in the country.
Now I spoke within global maybe -- only go up to 5% better.
But it would still be a dramatic improvement and the competitiveness of Louisiana and it would be a sign that the point -- class war for economics for getting in Washington.
Isn't being embraced.
By people actually have to make their states run cracking it would be a big national political motive for Jindal as well barriers in power now thanks so much you got some great.
Thinking thank you Virginia.
