The way the government evaluates the economic impact of tax reform is “downright dumb” and “intellectually dishonest,” Utah Republican Sen. Orrin Hatch said Monday.
The Congressional Budget Office and Joint Committee on Taxation figure out how much a tax reform proposal will cost the government in terms of tax revenue, score the bill based on that estimate and then provide lawmakers with that score — a process that has a big impact on a bill’s chances of becoming law.
Under the CBO and JCT’s current “static” scoring system, an income tax rate increase from 30 percent to 100 percent would give the government almost a 250 percent increase in tax revenue* — an analysis which leaves out the obvious fact that few people would be willing to work at all if 100 percent of their paycheck went to the federal government.
Hatch, ranking member on the Senate Finance Committee, and other Republicans want the analysis of tax proposals to include the more complicated but obvious impact of a given proposal on factors such as employment, income and gross domestic product — a method termed “dynamic” scoring. Opponents of dynamic scoring, mostly Democrats, argue such a system would be impossible to fairly or accurately implement.
“If you listen to some people discussing static versus dynamic analysis, you think dynamic analysis to be feared, is something that has never been used, ought to be avoided, contains mysterious features, is too hard to accomplish, and involves unmanageable uncertainties,” Hatch said Monday at an American Action Forum event. “Those views are typically overblown, and in most instances are also downright dumb.”
Hatch argued criticism of dynamic scoring is hypocritical, since the same Democrats who oppose its use in tax policy support using it for legislation they favor. The White House relies on dynamic analysis of an immigration bill that would bring tens of millions of immigrants into the country to boast it will increase GDP by 3.3 percent in 2023 and 5.4 percent in 2033, among other economic benefits. (RELATED: Immigration bill To Bring In At Least 33 Million People)
“These same Democrats have written off dynamic scoring as some sort of fantasy used by Republicans to justify lower tax rates,” Hatch said, “but when the same type of analysis could be used to bolster the case for the immigration bill, they were singing a different song. And off a different song sheet altogether.”
Dynamic scoring would likely make Wisconsin Republican Rep. Paul Ryan’s job a bit easier in the next few years. He is expected to head up the Ways and Means Committee, where he will likely author a comprehensive tax reform bill. (RELATED: GOP Unlikely To Compromise With Obama On Tax Reform)
Hatch stressed it would not be “a magic elixir” that would solve all the difficulties of passing tax reform, but said it’s “intellectually dishonest” to accept dynamic analysis on proposals like immigration, while criticizing its use on tax proposals.
“What matters to American households and businesses is not simply how much a proposal changes the revenue estimate or a budget score,” Hatch said. “What matters is what tax policy will do to or for them.”
“I believe the expanded and sensible use of dynamic analysis can, if done correctly, be an important tool to help us achieve our goals,” he added. “And I’m for using every tool at our disposal, cause we clearly have to pull this country out of the godawful mess we have right now.”
*TheDC originally reported that the government would require a 70 percent increase in revenue, but government would actually require a much bigger increase of 250 percent.
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