With the New Year and Congress with a Republican majority comes the push for a new and better way to assess tax laws.
Republicans want to view the economic impact of new tax bills
As per Reuters, a new math has hit fiscal and budgetary calculations with Republican Congressmen wanting to know more about the impact of tax legislation on the federal deficit using microeconomic projections. Tax laws have always been based on analysis by Capitol Hill Staff. Republicans would like to use a new math known as “dynamic scoring”, to score tax bills before they go on to become law. The introduction of new macroeconomic factors would undermine the present analysis, say opposing factions.
Those wary of these new methods say that this uncertainty in dynamic scoring would be reflected by the introduction of new macro-economic variables in to the analysis, thereby making fiscal policy uncertain. Right now the fiscal policy is to spend money America does not have to and to keep spending until no one says stop.
The Republicans conjecture that dynamic scoring will better reflect the real state of the economy and help improve fiscal policy allowing the lowering of taxes for economic growth at the cost of lower revenues.
Tax attorneys on the other side of the aisle have been very critical that the new rule, which the Republicans unveiled pre-Christmas, was done to augment support for the party; especially by the top Democrat in the House Ways and Means Committee, on this sort of tax-writing. The Democrats have taken America from $10 trillion to $18 trillion in debt without even blinking. They continue to make promises to millions of Americans in terms of social security and Medicare that they cannot keep. America cannot afford it!
Scoring will influence the outcome of a bill becoming a law
Law makers from the Democratic Party, like Sander Levin from Michigan who gladly handed GM $50 billion to save union jobs putting American in greater debt, find the Republicans guilty of rigging the system in the guise of dynamic scoring. He further says that dynamic scoring will lower the impact of fiscal responsibility and rely more on Republican style trickledown economics. The process of making tax laws require the proposal to be over hauled or “scored” by neutral staff experts of the Congressional Budgetary Committee (CBO) and of the Congress’s Joint Committee on Taxation (JCT).
These two bodies, CBO and JCT will assess the effect of the change in taxes on government revenue and expenditures and finally its effect on the federal deficit which the President has increased to $18 trillion without caring at all about it. This step is considered crucial because of the existence of a huge federal budget deficit.
The focus will shift to the broader economy and land value tax from dynamic scoring
Whether a tax will lower or increase government revenue and spending would now depend not only on the effect of the tax law on the budget but also on the broader economy. The Republicans want to see the ripple effect of a change in taxes. For example, they want to see if lowering them will affect the economy and help it grow which has proven to work in the past because the economy does better when the private sector is allowed to keep more of its money.
They would then quantify these changes and see if their sum total has increased. Some of the macroeconomic pointers to be used are GDP or gross domestic product as measure of the total economy’s output.
Tax attorneys on both sides will argue on the positive and negative effects of dynamic scoring and their stabilizing effect on fiscal policy, and on lowering federal budget deficits. According to the incoming chairman of the House Ways and Means Committee, Rep. Paul Ryan who understands budgets and business very well, dynamic scoring is for the most part reality-based scoring.