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1 1 (January 6, 2005)

handle is hein.crs/crsaita0001 and id is 1 raw text is: Order Code RS22020 January 6, 2005 CRS Report for Congress Received through the CRS Web Dynamic Revenue Estimating: A Brief Overview Jane G. Gravelle Senior Specialist in Economic Policy Government and Finance Division Summary Dynamic revenue estimating taking into account macroeconomic feedback effects from the economy was initiated in the 108th Congress, with the first analysis of the feedback effect provided during consideration of the 2003 tax cut. The effects varied in magnitude and direction, depending on the model used, and have not yet been incorporated into official estimates. To do so would be difficult given the lack of consensus about model and behavioral specifications; at present any analysis is provided to supplement official estimates. This report will not be updated. A long-standing issue of estimating the effect of tax cuts on economic output, and incorporating these macroeconomic feedback effects into future revenue estimates, became more prominent in the 108th Congress. For some years, the Joint Committee on Taxation (JCT) had studied the issue,' and had moved toward developing economic models for dynamic revenue estimating. (Official JCT estimates incorporate microeconomic behavioral responses, but keep aggregate output fixed.) When organizing for the 108'h Congress, a House rule requiring such a macroeconomic analysis to be provided for any tax bill considered in the House was adopted. The first instance of the application of the House rule was during consideration of the 2003 tax cut: H.R. 2, the Jobs and Growth Tax Relief Reconciliation Act of 2003. Although the Joint Tax Committee provided an analysis,2 a significant range of results 1 Joint Committee on Taxation Tax Modeling Project and 1997 Symposium Papers, Joint Committee Print, JCS-21-97, Washington, DC, U.S. Government Printing Office, Nov. 20, 1997. This project brought together nine modelers to estimate the economic effects of fundamental tax reform. The committee print provides an overview of their findings, their individual papers, and discussants' comments. 2 This analysis was inserted in the CongressionalRecord, May 8, 2003, pp. H3829-H3832. The committee subsequently published a background document that discussed modeling details: Joint Committee on Taxation, U.S. Congress, Overview of Work of the Staff of the Joint Committee on (continued...) Congressional Research Service **** The Library of Congress

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