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Macroeconomic Modeling of Tax Policy: A Comparison of Current Methodologies

19 Pages Posted: 1 Nov 2017 Last revised: 23 Nov 2017

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Itai Grinberg

Georgetown University Law Center

Thomas A. Barthold

Government of the United States of America - Joint Committee on Taxation

Nicholas Bull

Government of the United States of America - Joint Committee on Taxation

W. Gavin Elkins

Tax Foundation

Pamela J. Moomau

Government of the United States of America - Joint Committee on Taxation

Rachel Moore

Government of the United States of America - Joint Committee on Taxation

Benjamin Page

Tax Policy Center

Brandon Pecoraro

Government of the United States of America - Joint Committee on Taxation

Kyle Pomerleau

Tax Foundation

Abstract

The macroeconomic effects of tax reform are a subject of significant discussion and controversy. In 2015, the House of Representatives adopted a new “dynamic scoring” rule requiring a point estimate within the budget window of the deficit effect due to the macroeconomic response to certain proposed tax legislation. The revenue estimates provided by the staff of the Joint Committee on Taxation (JCT) for major tax bills often play a critical role in Congressional deliberations and public discussion of those bills. The JCT has long had macroeconomic analytic capability, and in recent years, responding to Congress’ interest in macrodynamic estimates for purposes of scoring legislation, outside think tank groups — notably the Tax Policy Center and the Tax Foundation — have also developed macrodynamic estimation models. The May 2017 National Tax Association (NTA) Spring Symposium brought together the JCT with the Tax Foundation and the Tax Policy Center for a panel discussion regarding their respective macrodynamic estimating approaches. This paper reports on that discussion. Below each organization provides a general description of their macrodynamic modeling methodology and answers five questions posed by the convening authors.

Keywords: revenue estimation, dynamic scoring, macrodynamic estimates, tax reform

JEL Classification: H20, H30

Suggested Citation

Auerbach, Alan J. and Grinberg, Itai and Barthold, Thomas A. and Bull, Nicholas and Elkins, W. Gavin and Moomau, Pamela J. and Moore, Rachel and Page, Benjamin and Pecoraro, Brandon and Pomerleau, Kyle, Macroeconomic Modeling of Tax Policy: A Comparison of Current Methodologies. National Tax Journal, Vol. 70, pp. 819-836, 2017. Available at SSRN: https://ssrn.com/abstract=3060608

Alan Auerbach

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-0711 (Phone)
510-643-0413 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Itai Grinberg (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue NW
Washington, DC 20001
United States
202-661-6615 (Phone)

Thomas Barthold

Government of the United States of America - Joint Committee on Taxation ( email )

Room 1625 Longworth House Office Building
Washington, DC 20515
United States

Nicholas Bull

Government of the United States of America - Joint Committee on Taxation ( email )

Room 1625 Longworth House Office Building
Washington, DC 20515
United States

W. Gavin Elkins

Tax Foundation

1250 H Street, NW, Suite 750
Washington, DC 20005
United States

Pamela Moomau

Government of the United States of America - Joint Committee on Taxation ( email )

Room 1625 Longworth House Office Building
Washington, DC 20515
United States

Rachel Moore

Government of the United States of America - Joint Committee on Taxation

Room 1625 Longworth House Office Building
Washington, DC 20515
United States

Benjamin Page

Tax Policy Center ( email )

Urban Institute
2100 M Street NW
Washington, DC 20009
United States

Brandon Pecoraro

Government of the United States of America - Joint Committee on Taxation

Room 1625 Longworth House Office Building
Washington, DC 20515
United States

Kyle Pomerleau

Tax Foundation ( email )

1250 H Street, NW, Suite 750
Washington, DC 20005
United States

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