CDZ Tax Reform Strategy

[jwoodie]

One of the impediments to passing an economy-stimulating bill to lower taxes is the CBO's rigid static scoring model for projecting federal revenues. Under this antiquated model, any increase in tax rates increases revenues, while any decrease lowers them. In addition, no offsetting effects on federal expenditures (e.g., changes in the unemployment rate) are included in the calculation of "revenue neutrality" over a 10 year period.

As a result, colossally expensive programs like the ACA were scored as revenue neutral (by balancing 10 years of revenue against five years of costs) whereas tax cuts are always scored as "costs" which must be balanced by offsetting tax increases (despite empirical evidence to the contrary).

One strategy to deal with this paradox is to condition tax cuts on increases in tax revenues. For example, any increase in 2017 tax revenues would trigger a proportionate decrease in 2018 tax rates. This self-fulfilling arrangement could even be accelerated by passing one-time special allowances for repatriating overseas investments and related capital gains.

Constructive comments/analysis?

 

[JakeStarkey]

Holes in jwoodie's OP are

(1) he thinks government creates jobs

(2) he thinks the CBO's scoring modeel is too rigid and static, and only offering the ACA as an example

(3) his solution for tax rates up and down is both rigid and static

 

[william the wie]

Not much, but you do realize that such self-correcting schemes can be found in the records of Ancient Egypt and Sumer? I would use three different models like with a rocket launch to score the bills and then see what happens beyond that I got squat. Take neural networks, fuzzy logic and genetic algorithms and see if they can predict the past and by how well and see How well that works.

 

[task0778]

Here's my idea: limit the deductions, credits, etc. to a percentage of your income. You get exemptions for yourself, your spouse, and a maximum of 3 other dependents. You pay taxes on the adjusted income that exceeds the poverty line, gradually increasing from 1% up to a maximum of say 20%. Same deal with business/corporate income BTW, no more of this crap with the big guys pay nothing. To foster startups I would support a maximum of 10% tax rate for your first few years of operations. Keep it simple.

Other thing is this: if people want Universal Health Care then everybody needs to pay for it like every country that has such a system does today. Maybe a combination of a tax that comes out of every paycheck like we do now for Social Security, plus a VAT tax that covers whatever the shortfall was for the previous year. And that VAT is automatically raised or lowered accordingly.

 

[jwoodie]

Holes in jwoodie's OP are

(1) he thinks government creates jobs

(2) he thinks the CBO's scoring modeel is too rigid and static, and only offering the ACA as an example

(3) his solution for tax rates up and down is both rigid and static

(1) Where did you get that idea? My premise is that tax cuts stimulate the economy and thereby create more jobs and less government spending.

(2) The ACA was an example of how to get around the CBO scoring model, not the model itself.

(3) It may be rigid (as in specific), but it certainly isn't static: Tax rate reductions would vary according to increases in tax revenues.

The OP is about a strategy for dealing with the CBO model. Do you have any constructive suggestions?

 

[william the wie]

You do have to control for type of tax. The proposed BAT will probably surprise on the downside in direct revenues and be a huge surprise on the upside in its effects on wages and employment.