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Treasury Department Report Assumes Instead of Analyzing

Dec 11, 2017 | Taxes

For Immediate Release

Today, the Treasury Department’s Office of Tax Policy issued a finding that claims the Senate Finance Committee's tax reform plan and other changes in the President’s budget would produce 2.9 percent sustained economic growth (compared to 2.2 percent under the Office of Management and Budget’s baseline and 1.8 percent under the Congressional Budget Office’s baseline), mostly as a result of the tax bill. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the following:

This Treasury report makes a mockery of dynamic scoring and analysis, which is meant to help policymakers understand how their choices will affect the size of the economy.

In this analysis, the Treasury Department doesn’t estimate the tax bill will help get us to 2.9 percent sustained growth, it just assumes it. Rather than modeling the macroeconomic effects of the Senate tax bill, they simply take the same fantastical assumptions they made in the President’s budget and apply them to the tax bill.

Real dynamic scoring relies on sophisticated models to determine the effect of tax changes on labor, investment, interest rates, and income growth. Every true dynamic estimate of the House and Senate plans find they will have a much more modest effect on the economy than what the Treasury claims.

The Treasury Department appears to have drawn a favorable conclusion first and worked backwards from there, failing to even recognize the substantial differences between the Senate tax bill and the Administration’s tax plan at the time they first made these economic growth assumptions back in May.

Dynamic scoring can be an important tool to help policymakers understand and structure pro-growth policy changes; simply making up claims because we want them to be true will blunt this tool and damage the policymaking process.


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