Grover Norquist On Reagan-Bush-Trump Tax Reforms And America’s Fiscal Future

- What you can do is take the income tax and take away it and everybody can have a 401k or an IRA or an educator or a universal savings account. So here's what I make, here's the universal savings. Everything I save, you don't tax. What I spend is taxed, which is the income minus the investment. So you didn't create a new tapeform, you sliced and made smaller the income that you do tax. It's a consumption tax because it's your income minus the stuff you saved. This is the Capitalism and Freedom in the 21st Century Podcast, an official podcast of the Hoover Institution's Economic Policy Working Group, where we talk about economics, markets, and public policy. I'm John Hartley, your host. Today, my guest is Grover Norquist, who is the founder and president of Americans for Tax Reform. For more than four decades, Grover's been one of the most influential voices in the conservative movement on tax policy and limited government. Since founding Americans for Tax Reform in 1985, he's led efforts to pose tax increases at the federal and state levels. He's helped to organize the taxpayer protection pledge signed by hundreds of elected officials and has played a critical role in nearly every major tax reform debate from the Reagan era through today. Grover, welcome to the podcast. John, good to be with you. Grover, I want to start at the beginning. You grew up in Massachusetts. How did you first become interested in economics and tax policy? Were there certain people or books or experiences that convinced you that taxes and fiscal policy were important, so much so to pursue it as your life's work? I went to the Western Library Book Fair where they sell off all the old annoying books that they don't want anymore. Everything from the Cold War, every anti-college book that existed, Whitaker Chambers, all of that stuff for a quarter and a nickel. And I read it and became a fairly well-read anti-communist, had a good grasp of the '40s, '50s, and '60s. And Herb Filbrick, I led three lives. I got his autobiography. I lived on something called Liberal Hill in Western Massachusetts, also known as Red Hill to some people. Herb Filbrick had cell meetings nearby when he was a communist and inside the communist stock. So I thought the Soviet Union was evil and a threat. And as I thought more about the dangers of state power, I realized that our government, it's not evil, but it had some problematic tendencies that any monopoly with power has and how dangerous that is. And so I was first an anti-statist of an anti-Soviet, and then I realized that there are real problems when a government puts too much power together against individuals on all senses. And from there, decided that the place where the state and individuals interact most historically is taxes and how they raise taxes and the power that they raise taxes and what they do with the taxes. And just in my own mind decided that that was the zone I wanted to work in. And I mean, talking in high school, I took a train into Boston to work on the Nixon campaign in 68. I was sixth, seventh grade, something like that. And so I was active politically. I never stopped being an anti-communist, but my focus, since there wasn't a whole lot you can do to fight the Soviet Union when you're 14, I began to focus on the economics, on the power of taxes to control people and to destroy things and to slow growth. And I went to Harvard College and studied economics, got a degree in economics, was slated to go to Harvard Business School. They were kind enough to accept me. But then I ran into somebody who said, "Well, there's a position as the number two person at the National Taxpayers Union, somebody who was on the board of the National Taxpayers Union up in Cambridge." And I said, "I'd be interested in that." And so I talked to the head of it and I took the job. Then I had to go argue with Harvard Business School to let me have a year off. Usually they tell people who are whippersnappers that haven't been out in the real world yet, "Come year in, but come in two years. Go do something useful and learn something, then come back to business school." In this case, I had to argue with them to take a year off. So they said, "Okay." I went down with the National Taxpayers Union, which was the only taxpayer group, national one in the country, just as Proposition 13 exploded in California. I worked in passing convention calls for a constitutional amendment for balanced budget in, I think, 18 states in a year and a half. I worked with initiatives in Arizona, California, Idaho that followed on from Proposition 13 in California, also Proposition two and a half in Massachusetts. So in one year, year and a half, I was in the center of the tax revolt, which then turned into the Reagan Revolution, the tax part of it, and got to meet and set up. I had a budget where I could go find activists and help finance them to get things going in various. I'm still working with some of the people. I don't know that I recruited them, but I discovered them. And so that was extremely helpful. Then I went back to business school. So I was with the National Taxpayers Union, then went back to business school. My father had an operation and instead of staying away for two years, I stayed away for one year so I could back up to Boston and be there. Went to business school for two years. That happened to be the Reagan election and was very active in that campaign in Massachusetts, which we won by 3,000 votes. I helped organize the effort with the Boston Areby who's the head Hasidic rabbi in Newton area. And his guy said that he was worth about 3,000 votes in Massachusetts. And we brought the president's daughter in to meet with him, which was exciting and interesting because she gave a speech about all the things she disagreed with her father on, and the rabbi Rebbie was voting for Reagan and wanted everybody else to because of Reagan's positions on those. So she seemed to think this was a time for her to share her views on the world, daughter of presidential candidate. But we survived, it happened, we got the endorsement, and it mattered. It was also important in New York as well. And then went back down to. After graduating from business school, I wrote, you're supposed to write a piece on how to organize something or other. And I did one on how to organize the modern Republican Party, which was really how to organize the modern conservative movement. And a chunk of that is what I still work on, which is kind of interesting. And good news is it worked largely. And so went to go work. I helped elect somebody to be head of the College Republicans. Then I helped him for six months getting that going, went over to Chamber of Commerce for two years as a speech writer and an economist. And then was just working generally in the modern conservative movement, going to all the meetings, not just my silo, but all the other structures. And then the White House wanted somebody to run Americans for Tax Reform, which was the outside group, kind of like Organizing for America that Obama set up. Americans for Tax Reform was the same thing. So I had a board given to me, a budget given to me, and was then never spoken to again, at least telling me what to do. I mean, I worked with them and everything, but we ran an outside campaign for that. And in running the campaign, this is the 86 tax bill, which took the tax rates down to 34 for a corporate down from 50, took it down to 15 and 27 for individual rates. We had two rates, much lower than what we're at today, and a corporate rate, which is 34, but then now has come down to 21. It was a great bill. It was bipartisan. We had Democrat support for it. Now, it basically was revenue neutral. It dropped about $60 billion over five or 10 years, but it was revenue neutral. And there was a concern that when this came back from the smoke-filled rooms, that it turned into a tax increase. And what would we do? Because everybody, all the congressmen and senators had said they were for it before they did the moving things around bit. So I created the Taxpayer Protection Pledge, which was designed to help this bill pass. Later, it turns out, to have redirected the modern Republican Party, which is helpful, and saved several trillions of dollars for taxpayers. But at first, my goal was to get people to sign a pledge not to support a net tax increase. And we got a hundred congressmen, all Republicans and 20 senators at the time, all Republicans. Later, we got some Democrats on the House and the Senate. Pardon? This is all for the 86 Tax Act. This is for the 1986 Tax Act. And because we had enough votes to kill it, if somebody tried to fiddle with it and turn it into a hidden net tax increase, and the White House was looking to make sure it didn't happen, as were the House and Senate Republicans. So they didn't try and turn it into a tax increase, which had happened in other bills. And then as we moved forward going into 86, a lot of people who took the pledge used it as part of their campaign. The president, when he would go and campaign for people, said, "This person has taken the pledge against raising taxes." So the pledge became a deal in 86, which was helpful and so much helpful that the Democrat Congressional Campaign Committee sued Americans for Tax Form and me and said, "You have illegally contributed to a campaign." I said, "What are you talking about?" "Well, you have endorsed all these candidates and you're a C4. You're supposed to do issues, not endorsements. "I said," I didn't endorse anybody. "Ah, you said this person's against tax increases. Well, yes, that's true. Well, everybody knows that's the right answer. And I said," Could I get that in writing from you? Because then I could retire if the Democratic Party would put in writing that the right answer is never to raise taxes. That would be pretty cool. "Anyway - That's terrific. I just want to just back up just a little bit. So you came out of business school and you sort of was, I guess, the seeds for ATR in that business school plan that you sort of had drawn up? Is that fair to say? No, it was a broader way of organizing the broader movement, but it would certainly include the taxpayer movement at the time. The American Tax Fund didn't exist, but Americans, but National Taxpayers Union and other structures did. It was - And nothing like ATR really existed prior to then. So you founded this in 1985, and I guess I'm just sort of saying the stage here. So prior to the Reagan Revolution, we had Nixon, we had Ford. Prior to that, we had Eisenhower. Was there just not a huge, I mean, interest in cutting taxes? Obviously, you got Democratic legislatures for basically half a century, and JFK was the one who really sort of cut rates to begin with. And of course, you had to launch the Great Society in those programs under LBJ. But in terms of tax policy, there just wasn't a whole ton of interest in it until the Reagan Revolution, even though tax rates were pretty high in general. Yeah, there was. Before Reagan was the Steiger Amendment in 78, that was cutting the capital gains tax almost in half. The Carter inflation and a high capital gains tax was killing investment. And that one we got bipartisan support for, which is very interesting. Before the taxpayer movement became powerful and successful, we were having Democrats vote with us on the original 81 bill for Reagan. If it hadn't had Democrat votes, wouldn't have passed. We had Republican Senate, but a Democratic House. We had to get enough Democrat House members who though, "I'm going to lose this next election if this doesn't happen." So this was a very interesting non. It was partisan, but there were enough deeds to come forward that it passed. The Steiger Amendment had more democratic support. That was cutting the capital gains tax roughly in half. And then there was Prop 13, which was by several hundred thousand individuals in California doing it. Howard Jarvis and Mr. Gann, Paul Gann put that together. I worked with both of them. They were great guys. And then they helped going out of 78 into other states to do similar initiatives, getting things on the ballot around legislatures that didn't want to limit taxes. So then with Reagan, people recognized that when the tax cut became effective, it was passed in 81. There was a 5% cut, a 10% cut, and a third cut, the 10% cut that made it to 25% cut. That was in January 1st of 1983. It was January 1st, I'm sorry, 81, 82, going into 84. And that. Now you got me confused. Now I'm confusing myself. But the year when it clicked in, either January 1st of 83 or 81, that must have been January of 84, we created four million jobs that year in 84. And then Reagan swept to elections, reelection with the 49 states. Absolutely amazing. And people saw the power of lower marginal tax rates, and the Democrats saw it too. So then we came back in 85, 86, which was when I came in to work with the Reagan people and the Republicans in the House and Senate. We had a Republican Senate and a Democratic House, which was terrified of being on the wrong side of a huge tax cut, which they had seen be so successful. So they were willing to cut the rates, the Democrats, but they didn't want to lose revenue. So we eliminated a lot of deductions and credits, some of which you could have passed on, some of which were useful. And we got basically a revenue neutral bill, but pro-growth. And so you saw the growth continue. And so Reagan's legacy was a series of seven years of economic growth, strong economic growth. Most recently in the last year, people go, "Oh, wow, 190,000 jobs created in a month. Whoa. We averaged between 300 and 400 for a full year when the Reagan tax cuts went through with two-thirds the size of the workforce." I mean, it was an explosion of job creation and wage increases because the rates came down. And then I had all these taxpayer groups that I'd helped set up at 78 and worked in politics through Americans for Tax Reform. But then it was in 93 that Clinton had won, wanted to do healthcare nationalization, some government augmentation of the government role in healthcare. And a donor came to me and said, "You should set up a meeting of all the people who don't like this government-run healthcare thing." And I said, "That's a good idea." And so we put that together. We had 20 people at the first meeting, although I listened to people. I was at the first meeting, there were like two and a half of us. And it was 20 to begin with. And we had chiefs of staff of congressional offices and Ralph Reed of the Christian Coalition. So we were building a coalition that wasn't just economics guys or businesses. And we had state legislators in there. And then that became a weekly meeting. And within a couple weeks, couple months, we realized if we're going to stop Clinton care, we need to slow everything down, everything down. So the gun people came in and the guys who wanted to fight other spending issues and so on. So we had a meeting that grew to about 40 people. The number two guy at the Republican National Committee came every week so we could coordinate with the Republican Party, coordinate with business groups that were for tax reduction and against government takeover of economic policy. And in an hour and a half, we would put together 15, 16 presentations where people would come in and say, "I want everybody to know about this." And what made that meeting work is I'd been to a lot of meetings in Washington DC, and we had a meeting. We had a conservative meeting in Massachusetts, which was quite good. But I said, "Okay, nobody talks for more than three minutes," because I would see meetings that would kill you because some guy would talk forever. You're only allowed to talk about what you're doing, not what your ridiculous hopes and aspirations are, because people would get up. "We should do this and we should do this. "And the guy talking has no capacity to do it, nor did anybody in the room. So what are we wasting our time talking about what we might have if we had it? And by saying three-minute presentations, hand out paper, and somebody said," Oh, that's mine. It takes more than three minutes. Write it down. Hand it out. Oh, I couldn't possibly write it down. "Well, then we're not going to let you talk for 10 minutes while you think it through. If you can't write it down, you haven't even thought it through. And it was very interesting. People didn't balk it, balk at it except if you had never been there before. We had to warn people, this is a three-minute presentation. Congressmen, speak for three minutes. Understand this. Do not come and say three minutes is you're clearing your throat. Three minutes, no arguing, no bickering. You disagree with somebody on some tertiary issue, you take it out of the room, you deal with it there. We're not doing debates. We want to make sure. And not everybody has to agree with everybody on everything. Early on, we had people who said, "The internet's so important. We should never regulate it for anything." And people who said that fighting pornography is so important, we should regulate the internet. And there were competing pieces of legislation and worldviews and they each presented, done, whichever one you wanted to work with, you could. We weren't going to throw somebody out of the room because they disagreed on an issue. And later on, when the decisions came on gay marriage, we had the gay Republicans and the pro-traditional marriage people in the room each presenting on projects they're working on. And they each presented on their reaction to the Supreme Court decision, and then they went out of the room to talk about where they might work together on their own time. Or to argue, but I know they were working on things where they could agree. So this was something that helped bring the modern conservative movement together in a productive way. No whining, no complaining, no going on and on forever. And then as that got organized from 93 on, going into 96, we had 60 people in the meeting. And again, the Republican Party was there on a regular basis. We actually had Elizabeth Drew, the very left of center writer for the New Yorker, came to the meeting because I had a theory that the House and the Senate mattered and the President Dole didn't matter. Or rather, not that it didn't matter. There was nothing I could think that we could do to help Dole get elected. Dole could do some things to elect Dole, but the movement could not convince him to do anything. So it's not that I didn't want him to win, I did want him to win. But I couldn't think of anything we could do positively. I mean, I tried, I gave some suggestions, but that wasn't going anywhere. They had their own idea of how to run a campaign. They did, they lost. We wanted to save the House, save the Senate, because power is in Congress. It's not in the president. This is why Trump is always frustrated. He didn't read the book. Or history. Congress eventually controls everything. They have the spending, they have the taxes. Presidents can have scandals, start wars, but they can't cut taxes or raise taxes or spend money or not spend money. They can't even put people on the Supreme Court. Senate does that. So we focused on the House and Senate, and she wrote a book on that, much of which was about stuff that came from the meeting. It was a very interesting approach there. So that meeting grew, and then we had - And it still Goes to this day. I mean, it's very Famous. It's been profiled in the movie Vice. And I think it's become one of the most important, I'd say, conservative gatherings, at least that meets weekly, probably the most important in DC that's generally open outside of Senate Syrian committee meetings and so forth. It's really amazing how successful it's been and just continuing to this day. I also just want to talk about the Taxpayer Protection Pledge because it's another huge, hugely successful thing that you put together. Just in part, if you could explain it, it's one of these things where people actually commit, politicians and many have committed to signing it, and this is the idea that they won't raise taxes in any form. How did that idea originate? You spent a little bit of time earlier speaking about that, but I mean, did you envision it to become such an influential institution and sort of conservative economic politics? And what do you think maybe explains the longevity of it? And sometimes there's controversies over it too when people don't sign it and so forth. Sure. I assume that one of the pieces to this puzzle was that I grew up in Massachusetts before immigrating to the United States, and that's right next to New Hampshire. And in New Hampshire, Mel Thompson, longtime governor of New Hampshire, had the pledge. And the pledge was, "I will veto any income tax." They didn't have one on wages in New Hampshire. "And I will veto any broad-based sales tax. So they have property taxes and business taxes, but no individual income tax on wages. Now not on wages or dividends and interest. It's zero, no income tax at all, and no broad-based sales tax. So the pledge has been ringing in my ears as a kid and recognizing that Massachusetts had it. Massachusetts didn't have it, New Hampshire had it, the other states didn't. And New Hampshire won elections and governorships because people could or could not be elected governor based on whether they made the pledge. And if you kept the pledge, the government was never going to get so big that it became problematic and hired too many Democratic precinct workers. So I think that had to have been part of the thinking that. But this was not just the governor or the president. And they never used the pledge at the state legislative level. That I don't understand. We now do that in New Hampshire. So we took that to Congress and the House and the Senate. And by 86, it was powerful. By 88, every Republican running for president except Dole signed the pledge. I went up to New Hampshire and got my picture taken with DuPont, Pete DuPont, signing a blow up of the pledge four feet by five feet in front of the Capitol, cover front page of the newspaper there. All the candidates got pressed for it. Dole wouldn't take it. They did a debate two or three days before the New Hampshire primary. And it was Pete DuPont, former governor of Delaware, who handed the pledge, kind of tossed it at him to Dole, and asked, "We've all signed the pledge never to raise taxes. What about you?" And Dole's comment was, "Why I never signed things I haven't read. The pledge is a sentence long. I won't know net tax increase." And so that was kind of embarrassing. But when he handed it to him, it landed in his lap and he acted, reacted as if he was a vampire and somebody tossed a crucifix in his lap. This is on TV. This is on TV. All us Republicans, we're never raising taxes. What about you? Oh, no, not me. I'm not in. Dole loses to Bush and goes on. He was running ahead. He won in Iowa. He was supposed to win. He lost. And Bush ran on the pledge. He was losing by 14 points to Bill Clinton when he stood up and gave his speech where he said, "The Democrats will come and ask," this is the Republican Convention. "The Democrats will come and ask me to raise taxes. I will say no. They'll ask me to come again and I will say no. And a third time they will come and I will say, Read my lips. No new taxes. He was 14 points down. He went on to win as the candidate who would never raise your taxes. And - In the 92 primary. Won the Republican primary, but then he won the general. And remember, he was losing by 14 points to this guy from Arkansas, which wasn't even technically a state at the time for crying out loud. How do you lose to Arkansas? Bill Clinton, nobody's ever heard of. He did. He broke his. And I'm sorry, I'm sorry. He won against Dukakis. When he broke his word, he lost to Arkansas. I'm confusing my dates here. The first election, he was down 14 points. Because he said, "I'm never raising taxes." He went on to win. Then he broke the pledge in 90, lost in 92. Okay. And so in each of these cases, the pledge played a very significant role in the races, primary and general. And then the state legislators took. We went out to states and state legislators and governors took the pledge. Today, two-thirds of all Republicans governors have signed the pledge. About 85% of all the House and Senate guys have taken the pledge, everybody was elected, and thousand plus state legislative leaders as well as state-elected officials. So the pledge became a bigger and bigger part of the modern Republican Party. Almost every Republican running has made the pledge. Sometimes they say it out loud. We always want them to put it in writing. But just about everybody running says, "I'm never raising taxes." And most of them put it in writing. And just I guess for our listeners who don't understand, I mean, the statement is a strong statement in the sense that even what the taxpayer protection pledge says in a sense is that it's certainly opposed to even instances where there are reductions in spending that come with some amount of tax increases, say, to Paid down fiscal debt. For example, there have been instances like in the 2010s, I think about this, I think back to the Simpson Bowles fiscal cliff, Jeb Bush's 2016 tax proposal. I think he refused to sign the taxpayers protection pledge in 15, I think 2015 when he was putting on his tax plan. And part of it was he still wanted to sort of keep on the table this idea that you could still maybe raise taxes in a minor way to secure a big reduction in spending. It feels like that was a long time ago now. And of course, none of these things came to pass either, or a few of these deals came to pass. I mean, fiscal cliff was another thing because of expiring tax law, but even that was, even Obama still continued the Bush tax cuts then. But just segueing into debt and public debt, which has been rising over the past few decades, I mean, you've consistently argued, and I'm sympathetic to this, that America's a spending problem rather than a revenue problem. And Obviously, Entitlements are a huge part of that. How do you think about the fiscal situation today where federal debt's risen to basically World War II levels, economic growth? I mean, maybe we'll get a lot out of AI, but there's a lot of, I think, increasing fiscal worries. Now these fiscal challenges and rising debt started a long time ago, but I'm curious, how do you think about it? Sure. There was an effort by the Democrats to say, "Well, we're worried about the deficit." No, they've never been worried about the deficit. What are you talking about? What they want is a tax increase. And they would say the deficit is a reason to raise taxes. I point out that raising taxes is what politicians do if they're not capable of governing. What politicians do instead of governing is raise taxes to pay for all the mistakes of the past and of the future and just paper it over with cash and make the problem go away. And the problem is just that things aren't working and you pass a law to spend money that says now things will work. They don't work, but that's yesterday's news and you keep moving forward. So the left uses the deficit as an excuse to raise taxes. And the Republicans pre - 1994 used to, "Okay, you've spent all this money. We will be the responsible people and raise taxes to pay for your destructive policies." Of all the money spent in the great society, they've had net negative effects on everything they are supposed to have fixed, from education to healthcare, to employment, to poverty. They're 17, $20 trillion for no benefits. And if somebody can find one, good luck. So the answer is we're not getting tricked again into raising taxes. And remember when they went to Reagan, the Democrats, and Bob Dole, and Bob Doyle, and said, "Why don't we have $1 of tax increases for $3 of spending cuts?" And the President didn't want to do it. He later said that was the biggest mistake of his presidency, but he agreed to it because Bob Dole and enough Republicans were not going to let you have a budget. And you couldn't do the defense budget without this. So he got blackmailed into that deal. At the end of the day, they raised taxes that was real and permanent, and there was no spending reduction. Not a little, none. Spending went up faster than before the deal. Now, Reagan learned, this is stupid, and most Republicans learned, boy, did we get taken. But Bush didn't. It makes me wonder, was he paying attention during the eight years of Reagan? Did he learn nothing? He sort of learned nothing during eight years of Reagan. And so he comes into the presidency and they come and say, "Hello, you are a cheaper date. We will give you two imaginary dollars of spending reduction for every one real permanent tax increase." Okay? Now, that's just insulting. You're a cheap date. We cheated Reagan three to one. We promised him three to one. I mean, if you're dealing with Confederate currency, why not make a 10 to one? You have no intention of paying off, but they just did it to humiliate him. And he took it, and he did the deal, and you got the tax increases, and a lot of Republicans wouldn't vote for the tax hike. So there's Democrats vote mostly, but there were Republican fingerprints. Every Republican who voted for that is dead or out of office now. So they're not part of the party anymore. And then when that happened, the Republicans took a shrillacking in 92 and lost to the nobody, Bill Clinton. At that time, nobody. From Arkansas, not a state. So how does the guy. Oh, by the way, during this, Bush managed the collapse of the Soviet Union. You think he's Winston Cherchill for crying out loud. And he gets thrown out of office by a nobody. Well, the tax issue's powerful. Okay. And what people learned was take the pledge, win the election, keep the pledge. I'm sorry, take the pledge, win the primary. Take the pledge, win the general, keep the pledge, get reelected. And that's when we went in 1994 to 96% of all the Republican candidates signed the pledge never to raise taxes. And they've kept it since. If you look at the 62 years from FDRs 1932 until 1994, when Republicans swept the House and Senate all taking the pledge, 62 years, there were two times that Republicans won Congress. Twice in 62 years. Once under Eisenhower, once under Truman. This was a Democrat one-party control of the country for 62 years. Well, they're Republican presidents. Yes. And they could veto bills. And when they left, Democrats passed everything they wanted. And that's what happened after Eisenhower, after Nixon, after Reagan. The Democrats had the House and Senate. They did what they wanted to. One-party rule. The pre in Mexico never had that long a period of that much control. 94 on, what happened? Republicans became the party that would not raise your taxes. We may invade small countries we can't pronounce. That could be a bad thing, but we will not raise your taxes. Republicans won control of the House and Senate 18 years. Democrats, six. 18 to six. And then six years it was split. The Republican Party has run the country more often than not since 1994 by good margin. Before that, they weren't players. They were the Washington generals up against the Harlem Globetrotters. They were on the field, but they didn't get to really play. They didn't get to score. Now the Republican Party is a competitive party in Washington, DC. And again, wins more often than not, for crying out loud, but not the domination they had when you have the solid Democratic South. And Democrats had 80% of the House and Senate when they did the New Deal. And 70% of the House and Senate when they did the Great Society. Republican margins are four to 20. This is a closer run. So that's how the tax issue flipped things. The Republican Party became competitive. When you look at the states, when Ohio became the state that wouldn't raise your taxes, they went to two-thirds super majorities. When Florida went from neck and neck, Florida went from neck and neck, blue state, purple state, to bright red, two-thirds both houses, when it became the party that would never raise your taxes. And Bush, Jeb Bush was very good on not raising taxes. He wouldn't sign the pledge because he thought it implied some failure on his father's part. And that everyone would look at Jeb Bush taking the pledge and say, "Oh, he's dissing dad." Okay? That's not what happened. What happened was the first several weeks of his announced campaign when he ran for president in 2016 was all about why are you the only guy not taking the pledge not to raise taxes. It's not what he planned to do, but that's what he did to himself. When his brother ran later, and when his brother ran for office, he just took the pledge like that. Told me he was going to do it before we started running, and we did it, and it was done. And nobody compared him to dad. They said, "He's the guy I'm not going to raise taxes." Good. Okay, done. But Jeb had the problem with it, and he made it a bigger problem by talking about it and moving that forward. So as the Republican Party, they won't raise taxes. Not only have we done better nationally, but if you look at the 50 states, and this is why I think the Republicans will win, and we will deal with the deficit and the spending issue. And the deficit is only a spending issue. There's no point in raising taxes. You raise the top marginal rates and so on, you lose revenue because you lose growth. That doesn't help. That doesn't even get you where you want to be by any stretch of the imagination. But what we do have in the 50 states is eight states with no income tax. Now, there used to be just six, but Tennessee and New Hampshire had no income tax on dividends and interest, but they did taxes on dividends and interest, not wages. Both of them abolished the tax on dividends and interest. So there are eight no-income tax state. There used to be, and up until six, seven years ago, eight states with a flat rate, a single rate other than zero. We've doubled the number of single rate taxes. There are now 16 states that have brought their rates down to single rates, not graduated like Carl Marks recommended in the communist manifesto, but a single rate. Treat everybody the same. Everybody's at 3%, at 4%, whatever it is, same rate. Treat everybody the same way. So the country's moving to reject, at least in red states, the idea of graduated income taxes, of taxing them, not us kind of rhetoric. Envy, hate, all that unpleasant stuff, the politicians. Envy is a sin. It's a deadly sin. It's not a political program, at least not for Republicans. And so at the state level, the Republicans have strengthened. We now have also five states that have passed a law that will trigger their income tax all the way to zero. As revenue comes in from growth, they put a cap on spending, money comes in, teachers union gets to steal some of it. The rest, a certain amount goes to permanently reducing the income tax rate. Step, step, step, step, step, step. So five are on their way to zero. Another seven have announced, "We're going to zero." And I look at the House, the Senate, the governor, they're taking real steps to get to zero. They've moved to two and a half already in Arizona. They've cut theirs in half in North Carolina. Georgia's gone to a flat rate, and the newly governor candidate for the Republicans, when he just won the primary said, "In the first four years as governor, I'm cutting the income tax in half. And in the second four years, I'm going to zero." In Missouri, the moderate of three candidates won. And he announced when he won, and they've got the vote coming up this fall, when he announced when he won, full school choice for every child in the state. And second, income tax goes to zero. I want to be in the Republican Party where the moderate Republicans position is full school choice, taking on the biggest and most powerful monopoly in the country, maybe the world, and income tax to zero at the state level. You bring those income taxes down, not by raising some other tax. This is all by spending less, by having the growth of spending fall to less than inflation plus population. And then revenue grows as the economy grows, but it takes less and less out of people's pockets as a percentage. So we are moving to a situation where we're going to have more flat rate tax states and more zero tax states. And the blue states are moving the other direction to taxes on life savings, wealth, taxes on higher income people to drive those people out of the state. And it's that federalism. Every 10 years, 10 or 11, congressional districts move from blue states that raise taxes to red states that won't, to red states that are either have no income tax or are getting rid of their income tax. And in 2032, another 11 states will move. And whatever the margin is now, if it was dead even, it'll then be 22 votes Republican majority. And 10 years after that, it'll be 42 because we keep moving more Republican, more districts out of blue states into red states, which gives you more Republican congressmen and more electoral college votes. In the next 15 years, the presidency and the Congress is not within the grasp of the modern Democratic Party if the Republicans maintain their position of we're never raising taxes and we're going to take the state income taxes to zero to have growth at the state level because that sucks investment and talent and Elon Musk and Peter Thiel out of blue states into red states. The whole divide between red states and blue states is amazing. I mean, just seeing all the responses to the California law tax, Washington raising their income tax rate considerably from no income tax states being a pretty high one. And yeah, it's amazing. It's such a stark contrast, not one that I could ever remember in my lifetime and probably ever. You know more than me the exact history. But just in terms of thinking about the Reagan legacy and tax reforms or the past federal tax reforms and going forward, you've been involved in basically every major tax debate since the Reagan administration. I mean, are there ones that you think were more impactful than others or better than others from a growth standpoint? I think a lot of people herald the Reagan tax reforms in the '80s, 81, 86. The top marginal income tax rate was very high going into that. And it was sort of brought down to, I think in 28 or so from, I think was above 50% before Reagan came into office. And JFK, of course, began this period of tax cutting previously. And also a big focus on that was corporate taxes too. And corporate taxes were coming down. The US then basically in the Bush era lowered individual rates, but didn't change corporate rates. And the US started to lag behind the Tax Cuts and Jobs Act, the Trump era tax cuts sort of made up for that and cutting the corporate rates and passing full expensing. I think the business tax cuts are probably the most pro-growth, but obviously individual tax cuts are very important politically too. So one, I guess my question is looking ahead, what do you think the biggest priorities for tax reform in the next decade are? There's obviously some things that are going to come up like in some of the things now with the one big beautiful bill being passed. There's some things that will expire in about four years or so, or I guess closer to three years now, like permanent expensing for structures. Or sorry, full expensing for structures but not made permanent, but it'll expire in four years. And so that's a tax battle that's coming up. I know for a long time you talked about indexing capital gains to inflation. That's been a huge battle. One that hasn't been resolved yet, but I know many, including yourself, Senator Tecruz, many others have been fighting for it for quite some time. But obviously the Democrats seem very intent on raising income tax rates to very high levels, as high as north of 50% on the top marginal rate, maybe creating new tax brackets for millionaires or billionaires. Obviously, there's the wealth tax discussion on California. You also have Republicans too who are trying to abolish property taxes in states too. So I think Florida or Texas. I'm curious, what do you see sort of the future of the big tax debates coming up in the decades to come? Yeah, that's a very good question. Let me start with the last one you mentioned, property taxes. Property taxes are very visible, very painful. People understand them. And that's why in California, they had a property tax revolt, not an income tax revolt back in 1978, because the property tax can jump up so quickly with inflation and property rights and property values increasing. What also passed in 80 was in Arizona. Not a big cut, but a cap on the rate, a cap on how assessments, how much they can go up a year, and a cap on total spending. 45 years later, Arizona is now the third lowest property taxes in the country. And I am very big on incremental changes where people can see the process. They don't get scared by making some big decision in one day that may go wrong or may not, but if we know, we can keep an eye on it. What you're seeing now, Texas is basically strengthening the Arizona model. The governor of Texas is running for reelection, says, "I want this, and I will campaign against any Republican who isn't with me on the property tax limitations that we're putting forward." Because he did that the last time around and took out 10 or 12 Republicans who didn't like school choice, and then they passed school choice. So this time he's saying, "Just for the record, so everybody understands, this is yes or no here. We are going to limit property taxes." And there are 14 states that have okay sort of-ish property taxes. 39 have some sort of thing that they're trying. What you're seeing sweep the states now is the Arizona, Texas model. Florida's working on this. A number of other states, Missouri. We are working with every state that's looking on their income tax to also say, have a conversation at the same time as the income taxes going down, on capping property taxes, ending state subsidies to local governments, because then the state government is co-responsible for all the stupid stuff that your mayor does. And you don't want to do that because the mayors are blue and the governors are red. So don't give blue mayors money to waste and then go, "Oh, I have to raise property taxes because the governor forgot to give me my check this week." No, no, no checks for you. You want it, you steal it. You want to spend it, you steal it yourself. And make every tub on its own bottom. Separating the state and the local governments from their funding. You raise your money, we'll raise our money. And limiting both what the state spends and what the local government spends. That's the model over time to having a pro-growth limited government, red states. Now, blue states have their own challenge. I believe over time they will react to the success of the red states, the people leaving of the red states. Eventually, the Berlin wall does fall because the government is better outside of that. But it won't fall overnight. It'll open up and people will begin to stay in Massachusetts, in New York, in California, and hopefully grow and thrive. 'Cause we want the whole country to survive. It's just you can't do it out of Washington because you can't show them this works compared to something else. You can with federalism. Vermont, New Hampshire, right next to each other. Vermont spends twice as much per capita for a lousier government. Twice as much per capita as New Hampshire. New York versus Florida. There are more people in Florida than New York. Who knew that? When I was a kid, Florida was full of cows. It's like the fourth biggest cow state in the nation. And now it's more people than New York State. And New York spends twice as much money as Florida does for its state government for the same number of people. So they spend twice as much per capita. That's why Florida has no income tax. There's $113 billion they don't take that New York takes. So they don't need $113 billion income tax. Gone. They just have the taxes they do have. The way you get rid of the income tax is to have spending not grow so rapidly over time, you need a sustainable budget. That's happening in the red states. We're seeing the beginning in the last year and a half, more competent, structured limitations on property taxes as well. Between those two, the red states should redouble their advantages over the blue states who have blue cities and blue mayors. And blue cities and blue states, mayors that are completely blue driving the costs up for blue governors. So I think we're in very good shape there. At the federal level, the biggest deal, I was just reading today, great quotations for the late Alan Greenspan. "We must debolish the capital gains tax. If we can't do that right away, index it for inflation. "I didn't know he'd said that. Newt Gingrich told me that he thought that he had it. So we went and searched it and found these great quotations where he walks through exactly why. If growth is your goal, take the capital gains tax to zero because that's a complete tax on investment that creates jobs and opportunities and better wages and more of everything. Second best, or get at the starter kit, is end the taxation on the part of capital gains that is inflation. And that is one where I've talked to the president about this. He says he wants to do it. Bessent, I've talked to, he says not only does he have the right to do it, the power to do it, but he wants to do it as well. Ted Cruz is a leader in the Senate. The Speaker's good on the House Side Leadership House and Senate are both good on this. And a lot of businesses, anybody who builds houses thinks this is the most important thing you could ever do. One of the Republicans who focused on the deductibility of SALT taxes because he lives in a high-income area and didn't want to get rid of the deductibility of state and local taxes. He said as important as that was, indexing capital gains is a bigger deal for his voters than SALT was, which is a lot of screaming and yelling went on about state and local tax deductibility. So that's the biggest pro-growth thing, but expanding expensing to all investment buildings permanently and all buildings structures would be very, very helpful as well. And then just keep taking the rates down. Well, there's, I guess, this famous adage that all taxes are bad, some are worse than others. And I'm curious, this has been, I think, at least on the part of academic economists, the fantasy or the dream is to somehow move to a system that is maybe just taxing consumption rather than taxing income. And there's a few different versions of this. And the idea is, one, you could make it progressive if people weren't very happy about it. But the idea is that taxing income is bad because you're disincentivizing work. And whether it's corporate income, whether it's individual income, taxing corporations, especially in taxing investors and taxing individuals and labor income, that these things are distortionary and it would be better just to tax consumption. So I think in this sort of economist dream, a lot of accounts would prefer switching from an income tax-based system to a consumption-based tax system. Now, in places like Europe or Canada that have VAT taxes, form of consumption tax, of course, they still have the income taxes too. So there is this, I guess, political economy problem, which I'm sure you're extremely familiar with, which is that policy substitutes are just, which is what this would be, swapping consumption taxes for income taxes. It's just a politically sort of infeasible sort of thing. But I know for a long time, people have talked about this for many decades, many, many scholars, many economists, many think tank folks. I'm curious, this is also somewhat related to some of the international tax debates over the past 15 years or so about should we have a cashflow tax? There's a big debate in the Tax Cuts and Jobs Act era between Paul Ryan, who is pushing this for a period of time during that debate. And folks, my understanding is folks like Charles Koch fought against it, even though it would arguably hurt his own business. And ultimately, they killed the so-called border adjustment tax or the consumption-based cashflow tax. I'm just curious, what are your thoughts on some of these sort of, I guess, more radical tax ideas? There have been some people that say we should only tax land values rather than property, and that goes back even further. But I'm curious, what do you think about these other ideas shifting toward less disortionary forms of taxation? Is it something that just politically will never happen? Or do you think that, you know, maybe if anything, it would be worse in the sense that we get a consumption tax layered on top of an income tax? Economists are fairly good at pointing out that this tax is less destructive than this tax per dollar raised. They should never be allowed anywhere near political decisions because they don't get that if you add a value-added tax in order to eliminate the income tax, you end up where Europe is, a value-added tax and an income tax and capital gains taxes and death taxes. But that's why you talk to the political people. The present income tax can be turned into a consumption tax. Don't tax capital gains. Don't tax investment. And you subtract all of the things that aren't consumption from your income base. And without changing the law on income tax, without adding another tax, okay, if you, if you have a tapeworm that's bothering you, the income tax, you don't swallow a second, second tapeworm to that in order to discipline the first one, because you'll find you have two tapeworms and they're both growing at their own rate. What you can do is take the income tax and take away it and have a, everybody can have a 401k or an IRA or an educate or a universal savings account. So here's, here's what I make, here's the, you know, universal savings. Everything I save, you don't tax. What I spend is taxed, which is the income minus the investment. Okay? So you didn't create a new tapeworm. You sliced and, and made smaller the income that you do tax. It's a consumption tax because it's your income minus the stuff Have you saved? So you can get there, but if you do it that way, which is what we're doing, don't tell anybody our secrets, over time, then you have a tax that's a consumption tax simply because it's income tax minus the parts that aren't consumed. If you add a consumption tax to the income tax because they promised you, Mr. Reagan, Mr. Bush, that will make the other one go away, they fib. The number one goal of the modern Democratic Party is to add a VAT to the income tax and the personal and corporate. Then we're Europe. Then we're Europe and it's over. So the value-added tax. I understand why this is why Paul Ryan is not a politician anymore. He's a very good theorist on economics. He's right on many, many things. But the idea of creating a that by another name, while the income tax lives without a stake in its heart, and I won't believe any stake in its heart, so I really just think you take the income tax and file it down to where it's just a tax on the consumed income, call it a consumed income tax. That's a good word for it. Then you don't have the problem that Paul. The reason why people like me went nuts over the idea of a VAT by another name is that then you're Europe and they just keep moving the VAT up. And the reason why the Europeans like high tax rates is because what the real cash is coming in on the VAT. But they go, "Oh, we're taxing rich people. Oh, you should be happy. VAT, VAT, VAT, VAT, VAT. Oh, we're taxing rich people." They have a very not progressive income tax structure, a tax structure in Europe, because that's where you get the money. You can't get enough money from rich people because to get serious quantities of money from rich people, you shut them down. They quit producing. They'll consume rather than produce. But you can go to the middle class and get more money and not have it blow up on the government. So we need to protect middle income people from the VAT being added to the income tax. And I believe we have successfully done so. So far with all the smart people, Hillary Clinton very much wanted a VAT. And these are things that as long as we keep at bay, we'll be fine. Yeah. Well, I remember Brian Malrooney, who was the prime minister of Canada in the '80s into the early '90s, he introduced you, and Canada didn't have a VAT tax before, and he introduced one with these sort of ideas in mind. And what ended up happening was he ended up getting voted out of office pretty decisively, and it sort of, I'd argue, put conservatives back for quite a while. Just my final sort of question for you is just any advice that you have for younger people. A lot of people who listen to this podcast are young, I think, policy types, young policy staffers, young, a lot of research economists, a lot of policy economists, people who are working at think tanks. I mean, you've been in a lot of debates and have had a lot of influence for a very long time. And I'm just curious, for those who, I guess, are trying to learn how to, I guess, influence policy more greatly, what is the advice that you have for those people? I like what you said earlier about making sure you have something that's at least written down for those who come to the Wednesday meeting to sell their ideas or whatever they're selling. I'm just curious what advice you have for young people In terms of getting their ideas and voices heard in a world where they can be very noisy in Washington DC or other state capitals around the US or in capitals around the world. In Washington, DC, there's a center right meeting. Send me a note. If you're a person with ideas and projects, no matter how young or how early you are in your career. I started going to one of these when I was in college in Massachusetts, and I could see everything. What I saw was much that needed to be done and could be done better, but that was where I learned everything I knew about what was going on. And you met with elected officials and you saw them and you saw them interact and you saw the other think tank people talk to each other. And I was a kid, but I was with college Republicans and the various conservative groups at Harvard. And so that was important. They're also, in the 45 of the 50 states, have center right meetings. A number have multiples. It's not just the capital, it's other states as well. So 45 states have center right meetings. I think it may be 46 actually, but 45, 46 have the meetings. They tend to be monthly, the one in DC's weekly. 24 countries overseas have center right meetings. And so wherever you are, talk to the conservative activists, elected officials, find out where the center right meeting is and offer to come. These things are off the record. They're not to be talked about, but you can learn a great deal there and share what you are working with, but also see things that work and things that. When people make ideas come to life, you watch other people do, even if it's the completely different issue than you work on. I watched a guy at our Wednesday meeting come in every several months talking about the campaign to legalize hemp. I didn't know it was a thing, but it was, and he won. And every few months he'd go, "Here's where we are. Here's what's going on. Here's what we need." He had his hemp tie in his hemp briefcase. It was really ridiculous, but he passed it nationally and state by state. Wow. Well, that's really amazing advice to academics, policymakers, or staffers of all ages in all stripes. Really, wanna thank you so much for joining us today. It's really Fascinating To discuss your career, how you've been in the tax reform fight since, and prior to the Reagan era. The future of tax policy in the US, future of fiscal policy in the US, and the during debate over the proper role and size of government. A real honor to have you on. Thank you very, very much. Appreciate it. This is the Capitalism and Freedom in the 21st Century Podcast, an official podcast of the Hoover Institution Economic Policy Working Group, where we talk about economics, markets, and public policy. I'm John Heather, your host. Thank you so much for joining us.