‘Dynamic’ impact of tax cut bill: $10.4B

Congressional scorekeepers found that the two-year tax cut extension passed by the Senate Finance Committee in July would reduce the deficit by roughly $10.4 billion under a “dynamic” score.

The Joint Committee on Taxation’s dynamic score of the legislation, its first on a new tax proposal this year, reduced the measure’s cost from $96.9 billion to $86.6 billion. The tax committee now produces both a dynamic score and the traditional “static” score for major tax bills, under new rules adopted this year by congressional Republicans.

{mosads}JCT found in its Tuesday report that the Senate bill, which restores dozens of tax breaks that expired at the end of 2014 for two years, would spur about $17.2 billion worth of economic growth over a decade.

The package would also increase debt by around $6.8 billion over that same time span because of rising interest rates caused by the increases in deficits. JCT also found that the measure would have negligible impact on the federal debt in its second and third decade.

The Senate package of “tax extenders” featured several provisions prized by the business community, including the popular credit for business research and incentives that allow companies to more quickly write off investments.

Republicans have been pushing to make those preferences permanent, arguing that the tax breaks are good for economic growth. 

GOP lawmakers pushed for requiring dynamic scores this year, insisting that the more traditional methods used by JCT and the Congressional Budget Office didn’t capture the true economic impact of major fiscal legislation.

The more traditional scoring tries to account for how tax and fiscal legislation changes people’s behavior but doesn’t take into account any potential macroeconomic changes. Democrats have argued that there’s good reason for that, calling dynamic scoring methods highly uncertain.