Tax Analysts Blog

Don't Count on Dynamic Scoring

Posted on Oct 11, 2012

In this morning's Wall Street Journal David Wessel gives a very nice summary of the issues surrounding dynamic scoring of tax bills. As Republicans have in so many prior episodes of tax controversy, and as they did during the August 2011 failed budget negotiations, Mitt Romney is invoking the growth effects of tax reform as a way to raise revenue.

Let me explain why that dog will not hunt. (1) Official scorekeepers at JCT, CBO, and Treasury do not take growth effects into account when scoring tax bills. (2) In January 1995 the first thing the new Republican majority in the House did was try to implement dynamic scoring. It did not happen. Why? (3) As practical matter it is almost impossible to implement for a variety of reasons, including (a) there are hundreds of estimates each year; (b) for consistency we would also have to dynamically score every bill that changed the deficit; and (c) Republicans hated the results of the first experiment that JCT tried showing that tax cuts that increase the deficit reduced economic growth. (4) There is legitimate controversy about whether reform produces significant growth. (Wessel quotes former Republican CBO Director Holtz-Eakin: "There are relatively few instances where we do something for which you get big impacts on growth.") (5) If Romney phases out deductions for the wealthy, he will negate much of any growth effects from lower rates.

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