House Republicans passed a bill earlier this month to force Congress’s non-partisan tax analysts to assume that tax cuts cause less revenue loss (or even increase revenue) because they improve the economy so much.
The Pro-Growth Budgeting Act of 2011 would require Congress’s Joint Committee on Taxation (JCT), the non-partisan organization that estimates the revenue impacts of tax proposals, to include the economic feedback effect of tax cuts into their revenue estimates. Republicans call this “dynamic scoring” and often call the estimating process in use now “static scoring.” The truth is that JCT currently does take into account the behavioral effects of tax changes, but not any effects on the overall size of the economy, which usually would be small and nearly impossible to predict accurately.
The real point of the bill is to give some sort of respectability to an idea that no mainstream economists believes in — that tax cuts can partially pay for themselves or can even increase revenue. For example, Senate Minority Leader Mitch Connell is fond of claiming that the Bush tax cuts did not lead to any decrease in revenue.
As Citizens for Tax Justice’s Bob McIntyre points out, even the Bush Administration Treasury, which was packed with “appointees who profess a deep affection for Bush’s tax-cutting policies,” found in 2006 that extending the Bush’s tax cuts would have essentially no beneficial effect on the economy over the long term, and would certainly not pay for themselves.
In addition to being wrong, the House’s rewrite of the revenue estimating process is also wildly unfair. It explicitly exempts appropriations bills from dynamic scoring, which means that any positive economic impact of increased spending or negative impact of cutting spending would be ignored while tax cuts are assumed to benefit the economy.
Based on this, Bruce Bartlett, a former Republican Treasury official, worries that the bill is another step toward creating “a smokescreen to incorporate phony-baloney factors into revenue estimates to justify unlimited tax cutting.”
Photo of House Republicans via Republican Conference and Creative Commons Attribution License 2.0