Art Laffer outlines his proposed tax plan

Reagan economist meets with potential GOP candidates

This is a rush transcript from "Your World," April 11, 2015. This copy may not be in its final form and may be updated.

STUART VARNEY, GUEST HOST: Harry, Carson, Bush, Jindal and Cruz, what do they have in common? They're all meeting with this guy today, former Reagan economic adviser Art Laffer, who is pushing them to push his massive tax cut plan.

It would scrap the current top tax rate, now at 39.6 percent, and replace it with an 11.8 percent flat tax.

All right, Art, this is a plan that you proposed to the Republican candidates. Are they buying it? Because it really does sound pretty radical to me. Are they on board with it?

ART LAFFER, FORMER WHITE HOUSE ECONOMIC ADVISER: I have just to say, Neil, you look really great today for -- I mean, just you look spectacular.

(LAUGHTER)

LAFFER: But let me just say, it replaces all federal.

It replaces the corporate tax, the personal income tax, the payroll tax, employer-employee. It replaces excise tax, Medicare, Medicaid, and it's two flat rates, one on business net sales and one on personal unadjusted gross income. And that was Jerry Brown's plan, as you and I have talked about, Stuart, many times.

VARNEY: Sure.

LAFFER: It's exactly Jerry Brown's, except he added 1 percent to it, so he made it -- instead of 12 percent, he made it 13 percent. But it's the right way to go.

(CROSSTALK)

VARNEY: Yes, but what is their reaction?

(CROSSTALK)

VARNEY: When you come out with plan like that, 11.8 percent flat tax all across the board there, that's -- I got say, that is a radical plan. What is their response?

LAFFER: Except for -- except for, I get eye-twisting and gasping guffaws, I have no idea what their -- you have got to ask them what their views are of it.

But, from my standpoint, that's the way you got to go. And if we don't create the economic prosperity, it ain't going to happen. And you just can't mess around with taxes. You have got to have a low rate, broad base, so you give people the least incentive to avoid playing the taxes and you give them the least places where they can hide their money.

You make it static revenue neutral, much like we did in the '86 Tax Act, and then you can just take this economy to the moon with prosperity.

VARNEY: OK. I just want to show our audience Ben Carson, who is speaking at this very moment to the NRA. OK. That's Ben Carson live. That's what he -- he is speaking right now.

Now, Art, I got to ask you, which candidates have you met with and which were -- which ones were most receptive to your flat tax idea?

LAFFER: Well, I can tell you which ones I met with. I can't tell you which one is most receptive or not. You have to ask them...

(CROSSTALK)

VARNEY: Sure, you can. You were face to face with these guys. You know whether they like it or not.

LAFFER: And they're polite. They're polite, nice people, Stuart.

(LAUGHTER)

LAFFER: They really are. They don't sit there and say, I really hate your idea and roll their eyes and guffaw and point fingers at me.

But, seriously, I think they're all very interested in a good tax plan. And I think they're awful sitting here trying to figure out how to get from here to there on prosperity in America, because there's no issue more important than economic prosperity.

VARNEY: Now...

LAFFER: And I think they're all focused on that really hard. Jeb Bush was. Ben Carson, I think, is spectacular, Rick Perry, Bobby Jindal. I'm going to have dinner tonight with Ted Cruz. These guys are really special people.

And then there are the ones I'm not seeing, they're great. Rand Paul, spectacular. Rubio is a fantastic person.

(CROSSTALK)

VARNEY: But they all want to make economics and prosperity center stage.

(CROSSTALK)

VARNEY: They don't want to go off on a tangent on other issues, shall we say, foreign policy or whatever else. They're all focusing on prosperity through cutting taxes.

Can you say that?

LAFFER: Well, I wouldn't say cutting taxes. I would say cutting tax rates and broadening the tax base, because all of these plans that I'm proposing are static revenue neutral.

In other words, you're not going to lose any money. It's static revenue neutral. All it does is change the constellation of taxes to make is as pro-growth as possible. Neil -- I mean, Stuart.

(LAUGHTER)

LAFFER: All taxes are bad. Some are worse than others.

What you want to do is collect your revenues in the least bad fashion and spend your money in the most good fashion. And when the last dollar of taxes is collected, the pain of that is a little bit less than the benefit of the last dollar spent, and then you stop already. You just stop and go on with your business and let the market solve it.

VARNEY: You're very persuasive, Art.

And Neil will be back on Monday.

(LAUGHTER)

VARNEY: OK.

Art Laffer, everyone.

LAFFER: Thank you, Stuart.

VARNEY: Good man.

LAFFER: You're great. By the way, who has got a great accent, too? Neil.

(LAUGHTER)

VARNEY: He is a Jersey boy. OK.

(LAUGHTER)

LAFFER: He's a Jersey boy.

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