Thursday, October 08, 2015

Dynamic Scoring

So I guess now is the time when the candidates release their tax plans. So it's the season when Republicans say they'll cut taxes, which means you pay less to the government, but the government will get more money because of growth. As a result, the deficit will shrink. We've tried this before and it never works, but they keep selling it. The other option is the government gets less money and we cut spending as well, but they never want to describe what they'll cut, because it doesn't add up unless they cut military or entitlements.

So Vox describes Why Marco Rubio is insisting that his massive tax cuts will pay for themselves, explained. In it, they explain the term "dynamic effect".

There are two ways to calculate the cost of a given policy. One is to do a static estimate that simply looks at the policy in isolation. So if I cut your taxes by $10,000, a static estimate will say the tax cut costs $10,000.

By contrast, a dynamic estimate tries to account for the way people respond to policy changes. So if I cut your taxes by $10,000, you might invest that $10,000 in a company that invents cold fusion, doubles the rate of economic growth, and creates a huge surge in future revenues.

The problem with static estimates is that they're wrong. The problem with dynamic estimates is that they're impossible.

There's also, Bobby Jindal’s plan for dealing with the 47%: tax the poor. "Jindal himself estimates that federal revenue will be cut by 22 percent, or $9 trillion, under his plan. And that's after taking into account "dynamic" growth effects."

Where he sticks out is the focus on raising taxes on the poor — on shrinking the "47 percent." By eliminating the standard deduction, the personal exemption, the dependent exemption, and the child tax credit, he intends to force millions of households that currently owe no income tax to pay up.

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