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How Do You Cap A Tax Cut?
Seriously.
Yesterday, according to the WaPo, the Senate voted to halve the President's tax cut proposal. Has anyone seen the actual wording of the amendment?
I ask because the government really has no power to increase or decrease tax revenues with any precision. All it can do is prescribe rates. It's like a video game controller that can change velocity, but can't control the cursor position directly. All estimates of revenue from tax rate changes are just that, and the discussion about the size of a tax cut is a fiction, because in reality no one knows what the true implications of a rate change will be--it's too dependent on things like the future state of the economy and changes in peoples' behavior that might result from the change.
So, just how did the Senate propose to limit the tax cut to a specific dollar amount? Was it like declaring pi to be three by fiat?
Posted by Rand Simberg at March 26, 2003 10:15 AM
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Comments
Hey, Fiat never declared Pi to be three! It was Peugeot that did that.
Posted by Francis W. Porretto at March 26, 2003 02:49 PM
Well, one thing they could do is cut spending, but it doesn't appear that either the Republicans or Democrats have any intention of doing so.
Posted by Eli at March 26, 2003 05:29 PM
While I'm all in favor of cutting spending, it's entirely beside the point of this post, which is about revenue.
Posted by Rand Simberg at March 26, 2003 09:11 PM
Tax cuts, increases, and entitlement changes are scored by the Congressional Budget Office and the Joint Committee on Taxation to estimate how much federal revenues will be affected. When the President sends his budget to the Hill, he includes the revenue effects of his various legislative proposals as estimated by the Treasury Department and the Office of Management and Budget.
A key point to the remember is that the Congressional Budget resolution is not a law. It is a Concurrent Resolution that is passed by both Houses of Congress, but does not go to the President for signature.
What capping the tax cuts in the budget resolution means is that any bill providing a tax cut that is scored as providing a higher revenue reduction will be subject to a point of order in the Senate and need 60 votes to pass.
Posted by Jon at March 27, 2003 12:45 PM
I assumed that it was something like that. Such "scoring" is of course a fiction, because it contains so many assumptions. The only thing we can be sure of is that the score will be wrong.
Posted by Rand Simberg at March 27, 2003 02:40 PM
Well, we all know what happens when you assume.
Posted by Steve at March 27, 2003 05:09 PM
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