It’s called dynamic scoring. It’s never officially used but the government to estimate the “cost” of tax legislation, but it represents reality. You cut taxes, the economy grows, more revenue comes in. Simple.
Conservative economists have told me that tax cuts don’t actually “pay for themselves.” But they do partially pay for themselves, to greater and lesser degrees, depending on the cut.
According to a new analysis by the Tax Foundation, the Republican tax cut plan would cost the federal government about $448 billion over ten years when scored “dynamically,” more that $1 trillion less than the nearly $1.5 trillion official estimate.
From the Tax Foundation report:
According to the Tax Foundation’s Taxes and Growth Model, the plan would significantly lower marginal tax rates and the cost of capital, which would lead to a 1.7 percent increase in GDP over the long term, 1.5 percent higher wages, and an additional 339,000 full-time equivalent jobs. In 2018, our model predicts that GDP would be 2.45 percent, compared to baseline growth of 2.01 percent.
The Tax Cuts and Jobs Act is a pro-growth tax plan, which, when fully implemented, would spur an additional $600 billion in federal revenues from economic growth. These new revenues would reduce the cost of the plan substantially.
Depending on the baseline used to score the plan, current policy or current law, the new revenues could bring the plan closer to revenue neutral. Overall, the plan would decrease federal revenues by $1.47 trillion on a static basis and by $448 billion on a dynamic basis, due to the aforementioned $600 billion in dynamic revenue reflow, expiration of multiple provisions, and the addition of the revenue generated from the functional repeal of the individual mandate.
H/T Washington Examiner.