This is a RUSH transcript from "The O'Reilly Factor," July 17, 2012. This copy may not be in its final form and may be updated.
Watch "The O'Reilly Factor" weeknights at 8 p.m. and 11 p.m. ET!
BILL O'REILLY, FNC HOST: Now for the "Top Story" tonight, reaction. Joining us from Chicago Dr. Austan Goolsbee, former economic advisor for President Obama. The Doctor currently teaches at the University of Chicago. So where am I going wrong here, Professor?
AUSTAN GOOLSBEE, PH.D., UNIVERSITY OF CHICAGO BOOTH SCHOOL OF BUSINESS: Well, it's good to see you again, Bill.
I think you went wrong perhaps in two places. The first is if you look at how much of their income, high income people are paying in taxes, it's not higher, it's actually dramatically lower. If you look at the 400 highest income people in the country, the amount of their income they're paying in taxes is about half of what it was 15 years ago.
So it wasn't class warfare when George Bush cut these taxes and nor would it be class warfare to have those -- those rates go back to what they were under Clinton.
O'REILLY: Yes, but there are a lot of other taxes that weren't in play as you know under Bill Clinton. I have -- I ask my brain room staff to put together a list of new taxes that President Obama has either passed or wants to pass. And they are staggering. And they are taxes that people don't know about.
So yes, you are right on the income tax level, 36 percent is less than the 39 percent plus under President Clinton. But the other taxes -- property taxes, state taxes, all of the other taxes have zoomed up to a level and now the President wants to raise the Social Security tax. He wants to raise the capital gains tax. He wants to raise the tax on interest to the level of your income tax. He wants to do more taxation than any other time in the history of this country.
GOOLSBEE: No, see.
O'REILLY: But even if the numbers -- even if you and I can't agree on the numbers, let's see if we can agree on the philosophy which is really what the debate is all about.
O'REILLY: The President wants social justice, redistributing -- redistributing the wealth from the few to the many. Correct?
GOOLSBEE: I don't think that's -- no I don't think that's correct.
O'REILLY: All right, well then, what does he want to do with all the money? He doesn't want to pay down the debt with it. He doesn't want to cut down the programs with it.
GOOLSBEE: That's what I was going to say what I thought was the second -- the second place where I thought you were going wrong in the original statement. In the President's view, when they -- were having the discussion of the grand bargain, the President would like to have one $1 trillion, about 25 percent of the long-run fiscal consolidation come from new revenue granted on high income people. And three quarters of that about $3 trillion come from spending cuts on discretionary, on entitlements, et cetera. That we use that revenue as part of a means of addressing.
O'REILLY: Yes but he hasn't put forth where he would cut.
GOOLSBEE: Of poverty for about 40 years.
O'REILLY: He's had three and a half years there have been no attempt to reform the entitlements. No specific cuts in any of what you call discretionary spending. We just don't know what he would do. But look, here's the bottom line --
GOOLSBEE: Froze all the discretionary spending.
O'REILLY: He's rolling -- here's rolling the dice.
All right, he's rolling the dice on the economy because his vision could very well fail. And if all of these things got passed the economy could just collapse because the achievers basically say I'm not going to invest any more money. I certainly would not invest to the level I am now.
With the 40 percent hit on anything that I make I'm just pulling it back, I'll put it in the Caymans, I'm putting it in Switzerland, I'm putting it in someplace else. I'm not putting it in here.
GOOLSBEE: But -- I -- I know you say that, but when Ronald Reagan was the president, three-quarters of the Reagan administration the top federal rate was 50 percent.
O'REILLY: But as an astute professor of economics you know that no rich people paid that rate. That there were all kinds of tax dodges that you could get around and that was true in the '50s, in the '60s, in the '70s and into '80s. Now those things are gone away. And President Obama wants to cut them back even further. He wants to cut back all the deductions for the wealthy even further.
GOOLSBEE: To broaden the base, I agree.
GOOLSBEE: Well a lot of Republicans do too.
O'REILLY: So I would want to pay 60 percent to 65 percent to state and local.
GOOLSBEE: No. No.
O'REILLY: Sure I would. Look, all of the tariffs said that come in for Obamacare are enormous. Ok, you take the cap off -- of the payroll tax, Social Security -- my -- my tax just go up another five percent. It's really insane to do that to people --
GOOLSBEE: But look, just look at how much of people's taxes, they are paying --
GOOLSBEE: -- how much of their income they are paying in taxes. It's not actually higher. Where at the Congressional Budget Office the same report you were citing.
GOOLSBEE: Show that people are paying the lowest share of their income in taxes that they paid in more than three decades -- it's not the case.
O'REILLY: But it doesn't matter if the percentage of five percent are handling 65 percent of the tax burden, come on.
GOOLSBEE: No but that's only the income tax. That's not counting the payroll tax which is what most ordinary workers are paying.
O'REILLY: The income tax is the big Kahuna and under President Obama's proposals that would go sky-high across the board. I'm looking at 60 percent, Professor. And I'm not going to do it.
O'REILLY: I'll retire.
GOOLSBEE: Look, first we want you in Chicago, Bill. If you want to leave New York, we will take you right here. We want you here.
O'REILLY: Emanuel could not handle me in Chicago I'll tell you that.
All right, Professor, one last question. I believe President Obama is a sincere man. I believe that he wants a much different type of capitalism in this country than we have had. Am I wrong?
GOOLSBEE: From the last eight years, yes. Something -- something different from that. Not different than what we've had in the history of the country.
O'REILLY: Well, remember the founding fathers didn't want a strong central government at all. And there was no income tax to the feds until the turn of the 20th century.
All right, Professor, it's always good to debate with you. Thank you for taking the time.
Content and Programming Copyright 2012 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2012 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.