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1 Testimony of the Staff of the Joint Committee on Taxation before the House Committee on Ways and Means regarding Economic Modeling, September 21, 2011 1 (2011)

handle is hein.tera/tesjoicom0001 and id is 1 raw text is: JOINT COMMITTEE ON TAXATION September 21, 2011 JCX-48-11 TESTIMONY OF THE STAFF OF THE JOINT COMMITTEE ON TAXATION BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS REGARDING ECONOMIC MODELING SEPTEMBER 21,2011 My name is Thomas A. Barthold. I am the Chief of Staff of the Joint Committee on Taxation. It is my pleasure this morning to describe some of the economic modeling that the Joint Committee staff uses to estimate the effects on Federal revenues from proposed changes in the nation's tax laws. The Joint Committee staff is nonpartisan and serves the entire Congress. One of the Joint Committee staff's key responsibilities is to provide revenue estimates. These are estimates of the change in Federal receipts that would result from proposed tax legislation. The Joint Committee staff's objective is to produce accurate, consistent, and impartial revenue estimates that can be relied upon by Members of Congress in making legislative decisions. A. Conventional Analysis What is a revenue estimate? What is a revenue estimate? A revenue estimate is an estimate of the change in projected Federal baseline receipts that would result from a change in law. The reference point for a revenue estimate prepared by the Joint Committee staff is the Congressional Budget Office (CBO) 10-year projection of Federal receipts, referred to as the receipts baseline. The receipts baseline serves as the benchmark for measuring the effects of proposed tax law changes. The baseline assumes that present law remains unchanged during the 10-year budget period. Thus, the receipts baseline is an estimate of the Federal receipts that would be collected over the next 10 years in the absence of statutory changes. The Joint Committee staff is required to estimate the revenue effects of proposals relative to the projected CBO receipts baseline. A common misunderstanding that arises in reporting revenue estimates to policy makers is the distinction between a revenue estimate and receipts forecast. Generally, when the economy is growing, the CBO forecast of baseline receipts is growing. A negative revenue estimate of a tax proposal does not mean that the Joint Committee is predicting receipts will fall. It means that receipts are predicted to grow more slowly if the proposal is enacted than they are projected to grow under present law in the baseline receipts forecast. Receipts would only decline if the revenue estimate were for a loss in revenues that was greater than the underlying growth in baseline receipts. 1

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