Congress switches to dynamic scoring

Congress switches to dynamic scoring

Taxes-egyptian-peasants-wikimedia-300x163This should have happened the last time Republicans took over all of Congress, in 1995. The new GOP majority is switching budget calculations to “dynamic scoring.” The L.A. Times reported:

For years, leading GOP lawmakers have wanted to change the way that the nonpartisan congressional staff calculates — or, in Washington parlance, scores — the budgetary cost of changes to the tax code.

Budget scoring now is fairly straightforward: Just figure out how much more money a tax increase would produce for the Treasury or how much a tax cut would cost in lost revenue.

Republicans, however, want two key congressional offices to use complex models to try to predict the broader effect of hikes and cuts on the economy. The process is called dynamic scoring.

The reasoning behind this is obvious: When you tax more of something, you get less of it. Conversely, if you tax something less, you get more of it.

So if tax rates go up 10 percent, actual tax receipts won’t go up that much — maybe only 8 percent.

Sometimes a tax rate increase can be so high it reduces actual tax receipts. How can that be? Well, for example, if a tax rate rises to 100 percent, nobody would pay it. People or businesses would just stop working or producing.

It’s just like in your own life. Suppose you work 40 hours a week. If you double that, to 80 hours a week, will you get double the output? Maybe for a couple days, or even weeks. But not for long. And the reduction in output-per-hour will decrease faster the older you are.

The change in Congress also is important as a change in mentality. It’s a subtle shift that emphasizes increasing private production, instead of trying to squeeze as much as possible out of taxpayers.

And if the U.S. economy grows faster because of this, so will California’s economy.

I know some folks will disagree with me on this. OK. Explain how, if you increase taxes from 50 percent to 100 percent, revenues will double. (Instead of, as reality, dropping to zero.)

6 comments

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  1. SkippingDog
    SkippingDog 1 December, 2014, 21:31

    The return of Republican Voodoo Economics.

    Reply this comment
    • Donkey
      Donkey 3 December, 2014, 08:21

      Skdog, at least put forth the reason excessive taxation is the model for American success! You can’t because even a RAGWUS goon like you knows that at some point people will just up and leave, thus depriving you of others people labor.
      The monopoly game being played by the Fed for the last eight years is exactly what Japan has been doing for the last twenty years, and the result will be the same. 🙂

      Reply this comment
  2. SkippingDog
    SkippingDog 1 December, 2014, 21:41

    Even Art Laffer didn’t make the kind of extreme claims you’re making here, John. The Laffer Curve is just that, a distribution curve shaped roughly like a bell. That means cutting taxes only works to increase revenues as long as the policy makers remain on the high side of the curve. If you reduce taxes too much, you get less revenue also. If you raise taxes too high, Laffer’s theory is that you’ll quit working so hard. If that were true, the 90% marginal rates and high business tax rates of the 1940’s through the 1960’s would have completely stalled our economy. History shows us that wasn’t the case at all.

    Reply this comment
  3. Timberrrrrr......
    Timberrrrrr...... 1 December, 2014, 22:01

    John, I think a lot of it has to do with the economy – even if it’s a fraudulent bubble economy. I noticed that the Fed government just collected record high tax receipts in the last fiscal year. But if you dig deeper into the weeds – look at the data for October 2014. For each dollar in taxes collected the Fed government spent $1.57. So they got over 50% more going out the back door than coming in the front door even with record tax collections. In fact, the deficit for the last fiscal year was about $500B – which is added to our Federal debt pushing it in the direction of $20 trillion dollars. Now, what happens when there is a currency crisis somewhere in the world that has close econ ties with America? (It’s bound to happen). The artificially low interest rates will spike. As the discount rate hits a historically normal 6% we’re in trouble. Big trouble. Our interest service payments will consume a third of the Federal budget. Both you and I know that they can’t keep the interest rates down forever. When you’re juggling 6 plates at once it’s only a matter of time when one drops and breaks – generally setting off a chain reaction. So I would not focus so much on the tax rates and their relationship with tax revenue. That’s only one minor piece of the problem. Keep your eye on the big picture. Interest rates are incredibly important today. The only reason they’ve kept them suppressed and articifically low is because the economy has not recovered and once they are allowed to rise our goose is cooked. Well done.

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  4. Timberrrrrr......
    Timberrrrrr...... 2 December, 2014, 10:42

    Just look across the ocean @ our good friends in Japan, John. Shinzo Abe made the fatal mistake of listening to Paul Krugman and following his Keynesian economic advice, thus implmenting Abenomics. Now he and his country are in a world of hurt. GDP contracting, wages falling, taxes rising, inflation and debt soaring, demographic implosion, money printing off the charts, consumer confidence collapsing, yen off the cliff…..a perfect storm – like a direct hit from a Category 5 hurricane. Not only is there an economic crisis, but also a political crisis to go along with it. The Japanese have been trained to be a very obedient and submissive people who are compelled follow the lead of their government leaders even if they are destroying their nation. Not far removed from the American psyche of late. Maybe once their economic ship lists for the final time and the Japanese citizens start taking on gulps of salty seawater there will be a change of attitude. But then again, maybe not. It’s a strange culture. All I know is that once Japan goes down the tsunami heads west and the United States is in it’s direct path. And it won’t be pretty. But that’s what we get for letting Paul Krugman influence major economic policies, not only in Japan but also in America.

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