Ryan Wants “Dynamic Scoring” to Assess Impact of Tax Reform
What factors should be included in measuring the budget impact of tax reform? The lawmaker likely to be the next leader of the House tax-writing committee wants to change the formula to account for projected economic growth from tax cuts.
Rep. Paul Ryan (R-WI), the presumed next chairman of the House Ways and Means Committee, said earlier this month that Republican control of the Senate next year would ensure more favorable revenue estimates for comprehensive tax reform.
According to Bloomberg BNA Daily Tax Report [subscription required], Ryan said analysis of any tax reform plan should use so-called dynamic scoring, which would take into account the macroeconomic effects resulting from changes to the tax code. Dynamic scoring would require less revenue directly from the tax code, instead forecasting economic growth resulting from various policy changes.
“Without getting into the details, we have to have the Senate to be able to do that,” Ryan said at an event hosted by the Financial Service Roundtable. “Ways and Means and Senate Finance control the Joint Committee on Taxation jointly, so you have to have both if you want to fix and improve your scorekeeping.”
Currently, the Congressional Budget Office uses static scoring to measure the revenue impact of particular legislative proposals, which does not account for wider economic effects. “The scorekeeping we use is not correct,” Ryan said, according to a report from The Hill. Generally, Democrats oppose dynamic scoring, citing the uncertainly of economic growth predictions.
In February, when current Ways and Means Committee Chairman Dave Camp (R-MI) put out his tax reform discussion draft, the joint committee provided both a conventional score and a dynamic estimate factoring in the projected additional economic growth that would result from the enactment of tax reform. Under that model, the joint committee said the Camp plan could generate an additional $700 billion in tax receipts over a 10-year period.
Ryan hasn’t said for sure that the Camp plan would be the starting point for tax reform next year, should he receive the tax panel gavel. He did say that tax reform could take several years to enact, Daily Tax Report noted.
“That’s the time window we’re looking at, one to three years,” he said.