Save Us From the CBO

The revenue estimates it and the JCT churn out ignore the real effects of tax policy

By Stephen Moore. Excerpts:

[they] "routinely overestimate revenue from tax-rate increases as well as losses from tax cuts."

"the CBO estimate of the 2017 Trump tax cut’s  . . . prediction has proved almost $1.5 trillion too low so far."

[they] "fail to take adequate account of how tax-rate changes affect the amount and timing of businesses’ and workers’ decisions—including how much to save, invest and work. Higher tax rates also lead to more tax-avoidance strategies."

[they] "now do some dynamic scoring, even this insufficiently accounts for the macroeconomic effects of lower taxes on growth."

"in most cases, U.S. tax-rate increases have lowered economic growth while tax-rate reductions have increased growth and employment. It happened after the tax cuts urged by Presidents Coolidge, Kennedy, Reagan and Trump. The CBO and JCT’s algorithms don’t adequately account for those historical data."

"Sen. Bob Packwood in 1988 requested that the JCT estimate how much revenue would be raised if Congress lifted the top tax rate on income above $200,000 to 100%. The answer to that is obviously close to zero. But the CBO calculated revenue increases of $104 billion the first year, $204 billion the second year, $232 billion in the third, and $299 billion in the fourth and fifth."

"a bill sponsored by Senate Majority Leader John Thune to eliminate the federal gift and estate tax. The JCT told Congress it would cost the government more than $600 billion in lost revenue over the next decade.

That’s hard to believe, given that the tax raised less than $34 billion in 2023"