Yes, Some Senate Republicans Are Actually Blowing The Opportunity Of A Lifetime With Tax Reform

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Matthew Kandrach President, CASE
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Earlier this week, the Senate Budget Committee voted to approve tax reform legislation, advancing Americans one step closer to benefiting from meaningful, growth-oriented tax cuts. And while the plan is far more complicated than it should be, it is critical for the Senate as a whole to pass the bill in order to help turbocharge our economy and allow American families to keep more of their own hard-earned money.   

As expected, Democrats are spouting the usual baloney and blowing their dog whistles, calling the plan a tax cut for the rich. The party of Chuck Schumer and Nancy Pelosi can’t help themselves from claiming that any attempt to separate the federal government from money and power earned and granted respectively by American workers and taxpayers is somehow always a handout to the well-off.     

More alarming, however, are the Republican naysayers in the Senate who now present a potential landmine to a generational opportunity to modernize our tax code and make our economy more globally competitive. Failure to advance tax reform will be a tragedy for small businesses, corporations, and the middle class, who all stand to benefit from the proposed rate cuts. Yet, it may be a small circle of Republicans in the Senate, not just the Democrats, who would be responsible for sinking tax reform.

Now is the moment for lawmakers to remember that they are here to serve the American people, and, at this point in time, the best way to serve the American people is tax reform. American families and small businesses need relief, and U.S. corporations need a better economic environment in which to make investments here at home and better compete abroad.

Notably, some Republicans are hinting or openly suggesting their potential opposition stems from concerns of adding to the deficit. These concerns are legitimate, but unfounded. From John F. Kennedy to Ronald Reagan, experience has shown that effective tax cuts pay for themselves.  

These Republican senators should consider which would be more troubling to them: Adding a small initial amount to the deficit in exchange for long-term growth, or handing back majority control of Congress to Chuck, Nancy and the rest of the Democrat spendthrifts? Does anyone think that they will care about adding $1 trillion, $5 trillion, or even $25 trillion to the deficit if they were to regain control of the federal government’s purse strings? 

Second, too much reliance has been made on static Congressional Budget Office (CBO) and Joint Committee on Taxation reports that fail to look at the whole picture — and as a result, don’t provide a full and more likely assessment of the benefits of tax cuts. Static scoring is a “simplified analysis wherein the effect of an immediate change to a system is calculated without regard to the longer-term response of the system to that change.” The key words here are “simplified” and “without regard to the longer-term response,” which equals an incomplete analysis of the effects and growth that will come from the GOP’s tax plan. Static scoring essentially disregards how people actually respond to lower rates, and assumes individuals and businesses won’t spend or invest more money, or behave any differently from a financial perspective.

To top it off, one of the reason given why the CBO doesn’t use dynamic scoring for its reports is because it would simply take too long and be too complicated to complete. The CBO’s website notes that “completing macroeconomic analysis of all proposed legislation would not be feasible” and therefore, is one of the reasons that it isn’t done. This is tantamount to an admission that accuracy is not the top priority of their analysis, even on legislation of historic impact. Welcome to government at its finest!

In contrast, dynamic scoring, considers the changes in personal and group behavior caused by lower rates, and adds that to the calculation to get a more accurate picture of how lower rates impact long-term economic growth and federal debt. 

One such example of a modeling that used dynamic scoring was released this week from the economists at the Interindustry Forecasting at the University of Maryland (Inforum) and Quantria Strategies. Their findings include that when scored statically against a current law baseline, the tax plan adds to the deficit by an estimated $1.6 trillion as estimated by CBO, but when considering the macroeconomic growth via dynamic scoring, they conclude the plan would impact the deficit much less at around $500 billion. As a result, they cite a revenue clawback of over $1 trillion attributable to the dynamic growth that the tax plan creates. And as for the deficit impact of $500 billion, if scored against a current policy baseline, the plan would be revenue neutral.

Even without getting hung up on static or dynamic scoring, Senate Republicans can and should be able to stand behind any tax plan that helps American families and businesses across the board. Failing to do so is a sure-fire way to bring back an Obama-like stagnant economy, as well as cede their majority in the next election cycle. At that point any scoring of deficit impacts from their tax and spend agendas, be it static or dynamic, will have one thing in common: they’ll all be in the red. If deficits are truly the concern of some Senators, they should coalesce and pass this tax plan in short order.

Matthew Kandrach is president of Consumer Action for a Strong Economy (CASE), a free-market oriented consumer advocacy organization.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.