Former Reagan economist Art Laffer and former Clinton pollster Doug Schoen on the impact of the tax reform legislation on states and mounting trade war concerns.
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Art Laffer And Doug Schoen: Blue State Tax Exodus?
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All right you heard might say. Let's get reaction from former Reagan economist laughter and Fox News contributor Doug Schoen to you first. What about going wrong here. I said the exodus is about to start. It will become a real flood. I'm sure you agree with me. I do. I mean I moved from California to Tennessee for exactly that reason and now with the salt deduction reductions it really makes it much much more. Let's say you've got a guy is paying a marginal tax rate of 10 percent in the state. Now he's going to instead of getting deduct 4 percent of that and paying only net 6 percent. He's now going to have to pay the whole amount. Now there is an alternative minimum tax clawback that he that he won't be affected. But you know it's going to be a huge thing for these states with high tax rates and also a large proportion of the people paying are earning income of five hundred thousand dollars or more. Those states are going to be hit hugely and those are the states you listed up there plus a few others D.C. Maryland. There are a couple of others that are really hit but those are the states that are just going to be slammed and they're going to all come to Tennessee where I am. OK. Knows there's no state income tax in Tennessee or a state. And it's that there's no state income tax either earned or unearned income no death tax low property taxes.
The only problem with this state is we're growing so rapidly we have such a big budget surplus and our credit rating is the highest in the nation. But other than that we're really an awful state. You've got a budget surplus. We have a huge surplus. We have the highest credit rating in the nation and the provision of public services has been improving enormously especially in education. Just wait there's more people coming. Hold on a second Donna. Doug Schoen is with me. Doug. How about have a conversation with her. All right. You say I said that this is going to hurt Democrats but that's in the long run in the short run it could hurt some House Republican Congress. It could. Because look the Republicans have at risk maybe 20 25 seats in these high tax states and the loss of the sole deduction will make them in the short term more vulnerable long term. These states are going to be impacted adversely. They're largely governed by Democrats and it makes the argument for democratic rule no matter how beneficence it may appear it makes it unsustainable given the fiscal impact. If you live in New York City. I mean I know that's a small number of people a very small posies. I know that know it includes you. If you take seriously good money I mean took a lot of money to make you pay in a tax rate of over 60 percent don't you. I do and I would tell you you know my van is fired up. I've been going as you know down to Florida. More and more and I hope I have the courage and indeed fiscal smarts that art has.
All right I'm not going to Tennessee but I'll be in South Florida in a jiffy but I'm serious. I'm serious. When you look at me let's suppose you earn a million dollars. Just suppose I'm thinking them out there. You make a million dollars. Six hundred thousand to that million goes to governments. Is that accurate. That is correct. It's also more expensive to operate in a place like New York with more regulation. And you want to be in a place where people welcome you rather than one and investigate you. It's true. Fire up very fired up yeah has got a lot of furniture that needs to get back to school. Now I want you to just stay there for us I want to check money because we've got the Dow industrials right now down what is it nearly 300 points to ninety eight to be precise. Just for stocks are actually up kenz. I think that's American Express Wal-Mart Coke and Procter and Gamble are up the other 26 are down. And by the way trade seems to be beginning to bite because as I understand it since the first trade jitters appeared our stock market has dropped to the value of two and a half trillion dollars. That's what's happened because of this trade fear should have a word about my investments are lefa. Yes I think you know until we solve this trade issue I'm pretty concerned about the markets. I mean I trust Trump on economics to be honest with you. I think he knows what he's doing and I think he's doing it to get lower tariffs not higher tariffs but frankly it scares the Jabers out of me.
And I just hate this type of talking trade. I was in the Nixon White House when we did all sorts of protectionist measures and the stock market fell by 50 percent. You know if you look at the Smoot Hawley the examples are just are everywhere about how protectionism but really is a buzz killer in the markets and in an economy. OK. The argument is that these tariffs proposed but not yet imposed by President Trump are just a negotiating tactic. That's why I think the way when we get a response you can't guarantee it. You know I can't guarantee it. Trump knows far more about what his negotiation strategies are i talked to him on the phone a little bit ago he told me is a free trader all the way and you know I believe him totally. I mean he ran an international corporation he knows how to get the best value when where. I mean all of that is really very true. But it's still scary and you know when you see the threats of more tariffs you just can't help but feel that queasy feeling that it's coming back again as a Democrat. Doug Schoen and you are still a Democrat. It's a free trade Democrat. Is this such a thing. You know there used to be. We're sort of going out of business but I exist. Look this the best thing that can happen to the Democrats because Trump's approval numbers were heading up and as the stock market goes down short term the argument for Republican control of the House and Senate gets weaker and weaker. Now I agree with Ari.
I think the president is playing with fire here. I would tell them to back off. But you know he's the president not me. But I would tell you short term this is manna from heaven for Democrats. Democratic Party with no message no strategy and no plan. This gives us an argument where none existed. You can't afford to leave the Democrat Party can't you because you are a political kind of guy. That's your business. And if you left the Democrat Party no Republican would touch with a ten foot pole. Stewart now that you have citizenship if you were prepared to run I'd be prepared to join your party and supporting you in a quest to change America. You are truly crazy. No Doug Schoen laughs both of you gentlemen thanks for joining us. Good to see you they'll be more on this.