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1 Stephen J. Entin & Scott A. Hodge, Transparency Would Improve JCT's Dynamic Analysis of the Camp Plan 1 (2014)

handle is hein.taxfoundation/taxfaav0001 and id is 1 raw text is: TAX(% FOUNDATION Transparency Would Improve JCT's Mar. 2014 Dynamic Analysis of the Camp Plan No. 417 By Stephen J. Entin Scott A. Hodge Senior Fellow President Key Findings * Rep. Dave Camp deserves credit for introducing dynamic macroeconomic analysis into the tax reform discussion by requesting a dynamic score of his plan from the Joint Committee on Taxation (JCT). According to the JCT's macroeconomic models, the economic growth resulting from Camp's plan comes from higher labor force participation and hours worked as well as higher consumption. * JCT's models also show that Camp's plan raises the cost of capital due to its heavy tilt toward lowering the tax burden on individuals at the expense of higher taxes on business and investment. The JCT analysis overstates the resulting growth because it underestimates the impact of reduced investment on wages and it inappropriately includes consumption responses. History tells us that capital is much more responsive than labor to after-tax returns, thus any dollar- for-dollar rise in the tax on capital and reduction in the tax on other sources of income must reduce total inputs of labor and capital and reduce GDP. Ultimately, the plan's effects on reducing capital formation will translate into lower wages for workers, lower economic growth, and, finally, lower tax revenues for the federal government. ........................................................... ...........

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