Taxes and the Economy
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A Short Guide to Dynamic Scoring
Revised August 24, 2006
In recent years, official scorekeepers and academic researchers have devoted increased attention to the macroeconomic effects of tax cuts. The Treasury also conducted a “dynamic analysis” of the President’s tax cuts that was included in this year’s Mid-Session Review of the budget as well as in a separate Treasury report.[1] … -
Treasury Dynamic Scoring Analysis Refutes Claims by Supporters of the Tax Cuts
Revised August 24, 2006
On July 25, the Treasury Department released a study entitled “A Dynamic Analysis of Permanent Extension of the President’s Tax Relief.” This study refutes many of the exaggerated claims about the tax cuts that have been made by the President and other senior Administration officials, the Wall Street Journal editorial page, and various other tax-cut advocates. … -
Claim That Tax Cuts "Pay For Themselves" Is Too Good To Be True
Revised July 26, 2006
In recent statements, the President, the Vice President, and key Congressional leaders have asserted that the increase in revenues in 2005 and the increase now projected for 2006 prove that tax cuts “pay for themselves.” In other words, the economy expands so much as a result of tax cuts that it produces the same level of revenue as it would have … -
Do Revenue Surprises Tell Us Much about The Cost of Tax Cuts?
July 18, 2006
The best answer to the question posed by the title of this paper is probably “no,” revenue surprises do not tell us much about the cost of tax cuts. The reason is that revenues are extremely volatile and move up and down in response to a variety of factors that have nothing to do with tax policy. Indeed, the impacts on revenue levels … -
The Recent Upturn in Revenues and OMB's Mid-Session Review
Revised July 14, 2006
Summary The Mid-Session Review issued on July 11 by the White House Office of Management and Budget projects that fiscal year 2006 revenues will be significantly above — and the 2006 deficit significantly below — the levels forecast in the President’s budget in February. This year’s strong … -
A Smoking Gun: President's Claim That Tax Cuts Pay For Themselves Refuted by Administration's Own Analysis
July 11, 2006
In remarks on July 11 touting revised deficit projections in the Mid-Session Review of the Budget, President Bush once again claimed that tax cuts pay for themselves: “Some in Washington say we had to choose between cutting taxes and cutting the deficit….Today’s numbers show that that was a false choice. The economic growth fueled by tax relief has helped send our tax … -
Estate Tax Repeal Would Decrease National Saving
June 8, 2006
Repeal of the estate tax would add about $1 trillion to federal deficits over the first decade in which its costs would be fully felt (2012-2021). These higher deficits would reduce national savings, with the consequence that, in the long run, estate tax repeal would have at best negligible, and possibly negative, effects on the economy. Surprisingly, … -
A "Mere" $300 Billion: Should a $300 Billion Deficit Be Considered a Victory?
Revised June 5, 2006
On May 4, the Congressional Budget Office revised its estimate of the deficit for the current fiscal year (2006) to “significantly less than $350 billion, perhaps as low as $300 billion, assuming enactment of the pending supplemental appropriations and tax reconciliation legislation.”[1] On May 9, Goldman Sachs … -
The Capital Gains and Dividend Tax Cuts and The Economy
March 27, 2006
The Treasury Department recently released a report entitled “The Economic Effects of Cutting Dividend and Capital Gains Taxes in 2003.” While the text of the new document acknowledges that gains in the economy since 2003 “are the result of a combination of many factors,” the pictures that accompany the report communicate a less nuanced message. [1] The graphs … -
Increases in CBO's Revenue Projections Do Not Show Tax Cuts Are Helping the Economy
January 27, 2006
New forecasts issued by the Congressional Budget Office confirm that if the tax cuts and Alternative Minimum Tax relief are extended, the nation faces large and growing deficits over the next ten years, with total deficits of between $3.5 and $4 trillion over that period.[1] While still quite high, CBO’s current deficit … -
Drop in Deficit in 2005 Does Not Mean Tax Cuts Are Spurring Economic and Revenue Growth; New IRS Data Confirm Tax Cuts Lose Revenue
Revised January 6, 2006
According to final Treasury Department figures, the deficit for fiscal year 2005 was $319 billion, down significantly both from last year’s level and from projections made at the beginning of this year. This progress is due to an increase in tax collections from last year (and from what had been projected earlier this year). Some are using this fact to argue that the tax cuts …
