Three times revenue increased after tax cuts

Published December 9, 2014 5:16pm ET



Congressional Budget Office director Douglas Elmendorf’s term expires at the end of this year, and conservatives are debating whether or not he should be reappointed. Some say Elmendorf has been nonpartisan and that reappointing him would give CBO’s estimates credibility. Others say Elmendorf should be replaced by a director who would be more willing to use a method of analysis known as “dynamic scoring” under which the budgetary impact of policies are evaluated after taking into account the economic effects of the proposal.

The issue is especially relevant when it comes to assessing the effect of changes in taxation on federal revenue. Lowering taxes, for instance, is typically scored as reducing revenue by the amount of the tax cut. But the actual revenue effects may be different from that, because tax cuts can also spur economic growth, which creates more personal and business income from which to squeeze revenue.

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