Wednesday, January 17, 2018

2018 NYU Tax Policy Colloquium: Greg Leiserson on dynamic scoring, part 1

Yesterday was the first day of the 23rd annual NYU Tax Policy Colloquium. It was great to meet this year's class, and to see old friends at the PM session, and to start co-teaching it with Lily Batchelder.

At the session, Greg Leiserson of the Washington Center for Equitable Growth presented his very timely paper, "Removing the free lunch from dynamic scores: Reconciling the scoring perspective with the optimal tax perspective."

Obviously, this paper comes in the immediate aftermath of the enactment of the 2017 tax act, in which "dynamic scoring" played what I would call a quasi-prominent role. I modify "prominent" with "quasi" because:

1) the regular score, not the dynamic score, was the one that ended up being used to measure compliance with the budget rule capping the revenue loss at $1.5 trillion,

2) due to the rushed process, the Joint Committee on Taxation wasn't able to issue its dynamic score until late in the process, when the end result was verging on fixed and certain. So it doesn't seem to have had any direct influence on what happened. Plus, once the score came out, showing an estimated dynamic revenue loss of about $1 trillion, Senate Republicans promptly rejected it for no good reason, based purely on their supposed intuitions.

Nonetheless, the score did matter atmospherically in a couple of ways that may linger.  For one, it actually rebutted claims that the act would pay for itself, and even come close for doing so. For another, it did indeed predict a significant, albeit inadequate, growth response to the tax cuts, which it showed as reducing the revenue cost by about one-third.

As it happens, there are many reasons why I and others think that the $1 trillion dynamic revenue score was way too optimistic. Just as a starting point to motivate viewing it as very contingent, it's based on weighted combinations of three radically different forecasting models, without disclosure as to what each of those models separately showed. JCT really hasn't disclosed very much regarding the inputs to the dynamic aspect. But that says nothing as such about too low versus too high, except insofar as one might draw inferences from the extreme pressure JCT was under from its bosses to lean towards optimism, at least to the degree consistent with its incentive to limit harm to its own institutional reputation.

My reasons for thinking the score was probably too low, not too high, are as follows:

1) I think their regular score was too low, reflecting insufficient adjustment for the massive tax planning opportunities that the act has encouraged and that we will be reading about in the newspapers within a year or two, if not sooner.

2) There are several reasons for thinking the dynamic adjustments were too high. Perhaps the most important is that the model is based on assuming that other countries won't respond by lowering corporate tax rates in response to what we've done. That's an extremely unrealistic assumption, adopted solely because it's outside their models to build in how other countries are likely to respond. But just because that's hard to model (or outside their models) doesn't mean it isn't both likely and important.

3) My prior would have been to lean towards the Penn-Wharton budget model, which came out a bit higher.

All this is just background for Greg Leiserson's paper. He is interested in dynamic scoring as an approach, not (for purposes of this paper) in whether the estimators got it right. He raises important challenges to what he calls the emerging consensus on how dynamic scoring is (and ostensibly should be) done. But I will save this set of issues for my next post.

6 comments:

URGENT LOAN said...

Hello Everybody,
My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com) Thank you.

Dr Purva Pius said...

I’m Charles David by name, i want to use this medium to alert all loan seekers to be very careful because there are scam everywhere, Few months ago I was financially strained, and due to my desperation I was scammed by several online lenders. I had almost lost hope until a friend of mine referred me to a very reliable lender called Dr Purva Pius ( A God fearing man) who lend me a loan of $237,000 under 72 working hours without any stress. I explain to the company by mail and all they told me was to cry no more because i will get my loan from this company and also i have made the right choice of contacting them i filled the loan application form and proceeded with all that was requested of me and to my shock I was given the loan, If you are in need of any kind of loan just contact him now via: {urgentloan22@gmail.com}

I‘m using this medium to alert all loan seekers because of the hell I passed through in the hands of those fraudulent lenders.

Thanks you Dr Purva Pius Loan service for your help.

MARIA Osman said...

DO YOU NEED 100% FINANCE? we give out loans with an affordable interest rate of 3% just contact fastreliablefirm@gmail.com and their aims is to provide excellent Professional Financial Services.

Michelle Huxford said...


ALL THANKS TO UPSTART LOAN AM NOW FINANCIALLY STABLE . upstartloan@yahoo.com
I am Michelle Huxford from Casper, Wyoming. I was in a very chronic financial issue and terminal health situation some few weeks back. After all my search for assistance from friends and neighbors proved abortive, I feel there was no one who truly cares. I became so emaciated due to lack of good food and my 2 kids age 5 and 8 were not also good looking due to lack of proper care as a result of finance. One faithful morning I saw an old time friend of my late husband and I told him all I have been going through and he said the only way he could help was to direct me to a good loan agency that also helped him, He explained to me on how he was financially down and how he got boosted by this loan agency UPSTART LOAN INC ( upstartloan@yahoo.com ) who grant him 245,000 USD loan at an affordable rate. He further assured me that they were the only legit loan firm he found in the quest of seeking for loan after been scammed by various fake loan lenders online. He gave me their email: upstartloan@yahoo.com or text/call (574) 301-1639, That was how i applied and was also granted a loan and my life changed for the good. CONTACT THE ONLY GENUINE LENDERS( UPSTART LOAN INC) VIA email: upstartloan@yahoo.com or call +1 (574) 301-1639 to resolve your financial mess.

Joe Johnson said...

Hello, are you looking for a business loan? Personal loans, home loans, car loans, student loans, debt consolidation loans, unsecured loans, venture capital, etc. i got my loan few weeks ago from ACE CASH EXPRESS .contact them today for your loan via email (juliajohnson88@outlook.com) call +15742161045 they give all kinds of loan.

randy william said...

Attention!!!

I'm Mr. Johnson Williams, a legitimate private loan lender, do you need a Loan for business or to pay your bills? If yes we offer all kinds of Financial assistance to cooperation agencies and people Financial, we offer all types of loans at a low interest rate of 3% to request an email now through: willianloanfirm6@gmail.com and we will do it Proceed immediately with your loan process, the loans are delivered to Clients within 24 to 48 hours. To request contact us by email: willianloanfirm6@gmail.com

Thank you

Mr. Johnson Williams
Managing Director
Email: willianloanfirm6@gmail.com
Phone: +1(409)-331-6319
whatsapp: +1(214)-305-8945