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1 J. D. Foster, The Prospects for Improving Official Revenue Estimates 1 (1995)

handle is hein.taxfoundation/taxfaauc0001 and id is 1 raw text is: TAX W
FOUNDATION

February 1995

The Prospects for Improving Official Revenue Estimates
Senate Finance Committee Testimony

The following testimony was presented
by Dr. Foster before the Senate Finance Com-
mittee on January 24, 1995.
Mr. Chairman, Members of the Commit-
tee, my name is J.D. Foster, and I am the Ex-
ecutive Director and Chief Economist of the
Tax Foundation. It is a pleasure to be before
the Committee again. I thank the Committee
for the opportunity to appear today to discuss
the prospects for improving congressional rev-
enue estimates through dynamic scoring.
The Tax Foundation is a non-profit, non-
partisan research and public education organi-
zation that has been monitoring fiscal policy at
all levels of government since 1937. We have
approximately 600 members, consisting of
large and small corporate and non-corporate

Accepting the limits of human
knowledge, Members of Congress
should be able to take the accuracy of
revenue estimates for granted.

businesses, charitable foundations, and indi-
viduals. Our business membership covers
practically every region of the country and ev-
ery industry category.
When it was established in the 1930s, the
Tax Foundation's founding fathers set out cer-
tain principles of taxation which the Tax Foun-
dation would promote and which would guide

our analysis of tax proposals. According to
these principles, a good tax system should:
*  Be as simple as possible - complexity
makes accurate tax compliance needlessly ex-
pensive and diminishes the public's willing-
ness to comply with the law;
* Not be retroactive - taxpayers must
have confidence in the law as it exists entering
into a transaction;
* Raise revenue, not micromanage the
economy with subsidies and penalties;
*  Not be continually rewritten - fre-
quent change lessens citizen understanding of
the tax code and complicates long-term eco-
nomic planning; and,
*  Be implemented recognizing the com-
petitive nature of the world economy.
I commend the Committee for meeting to
hear economists argue over the esoterica of
revenue estimates. And I appreciate the pa-
tience required to sift through debate about
the current practice, what I call nearly static
scoring, versus dynamic scoring, particularly
when there should really be no debate. Ac-
cepting the limits of human knowledge, Mem-
bers should be able to take the accuracy of
these estimates for granted. But instead, Mem-
bers have had to take for granted that the esti-
mates have often been systematically in error.
Further, Members have been consistently told
by the Treasury, by the Congressional Budget
Office (CBO), and others that these errors are
unfortunate, negligible, and in any case un-
avoidable, and that the basic methodology for
estimating revenues should not be changed.
Let me just say - I disagree, and I am not
alone. Among others, the current President of

By J.D. Foster
Executive Director and
Chief Economist
Tax Foundation

I IEF
F FU I

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