Ever since the late 1970s, some Washington hands and a few economists have argued that cutting tax rates would increase federal tax revenues – and that “dynamic scoring” would prove it. The argument is that lower tax rates would increase work, saving and investment, and that as a result the economy would grow faster, yielding more revenue, not less.
This refrain has echoed for years, running through all of the tax changes since 1981, and recurring in the years between. And we hear it again today: Proposed tax cuts will reduce, rather than increase, the deficit – if only we take account of the effects on economic growth.
However, the conventional tool of budget analysis – so-called “static scoring,” – assumes that the economy remains unchanged. To the faithful, that sells tax cuts short. Assuming that the economy doesn’t change at all must be inferior to taking changes into account, right? So why, other than politics, would any bozo not use dynamic scoring?