State Controller and Economist Art Laffer Featured at CalTax's 91st Annual Meeting

In the event's keynote speech, State Controller Betty Yee thanked CalTax for its research and educational efforts, and said the association's work "very much informs the work that all of us do as policymakers."

Discussing her proposal for "comprehensive tax reform," the controller said her office will host a series of meetings in several regions of the state to collect input from business representatives, proponents of economic development and others. Participants at these private meetings will delve into revenue issues, but will not consider the spending side of the ledger, she said.

The state's current tax structure, Controller Yee said, "is not sustainable" and has become inefficient over the years.

Controller Yee thanked CalTax members for staying in the Golden State and creating job opportunities for Californians. "I know it's not easy," she commented.

The controller also gave a report on the state's employment growth and the governor's budget proposal, which she applauded for being "more prudent than ever" given the uncertainty of potential changes at the federal level. California needs to focus on transportation, infrastructure and affordable housing to attract jobs and investment to the state, Controller Yee added.

Distinguished economist Dr. Arthur B. Laffer, the "father of supply-side economics" and creator of the Laffer Curve, provided an animated and lighthearted look at the heavy topic of taxation.

"The paradigm has to be shifted," Dr. Laffer said. "… The paradigm here (in California) is that a tax increase is a revenue increase – it's not!"

The economist said statistics show that states that have no state income tax consistently outperform states with high income tax rates in gross domestic product, adjusted for inflation and normalized to factor for working-age adults.

"Policies have consequences," he said, citing the relocation of businesses, people and wealth from high-tax states to low-tax states.

Dr. Laffer used himself as an example, saying he loved living in California, but moved to Tennessee strictly because of taxes. "I bought my house in Tennessee with my first year of tax savings," he added.

Dr. Laffer, who holds degrees in economics from Yale University and Stanford University, was the first person to hold the title of Chief Economist at the Office of Management and Budget, serving from 1970 to 1972 under Secretary of the Treasury George Shultz. He was a member of President Ronald Reagan's Economic Policy Advisory Board for both of the president's terms, advised Prime Minister Margaret Thatcher on fiscal policy in the United Kingdom during the 1980s, and now serves as a tax policy advisor to President Donald Trump.

The U.S. economy will grow "as long as you stop reloading the gun and shooting it," Dr. Laffer said. The self-described "Clinton Democrat and Reagan Republican" said reducing taxes will lead to major economic growth, and "once this machine starts, it doesn't stop."

March 17, 2017

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