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Push for new tax math seen if Republicans seize U.S. Congress

WASHINGTON (Reuters) – A new math for tax policy is attracting fresh attention in Washington as polls suggest that Republicans could capture full control of the U.S. Congress next month.

Known as “dynamic scoring,” the approach is about how to estimate the federal budget impact of tax law changes and it has long been backed by Republicans but opposed by some Democrats.

In recent remarks to a financial industry group, Representative Paul Ryan said that if his fellow Republicans can seize control of Congress in the Nov. 4 elections, they could make dynamic scoring a more integral part of tax analysis.

“What we want to do is change our measurement so that we can use – people say it’s dynamic scoring – I really prefer to call it reality-based scoring,” said Ryan, favored to become chairman of the House of Representatives’ tax-writing committee in the new Congress that will convene in January.

“One thing we know for sure, that we’re positive about, is the score-keeping we use is not correct,” he said.

Right now, whenever a U.S. lawmaker wants to raise or lower a tax, the proposal has to be “scored” by the non-partisan staff experts of Congress’s Joint Committee on Taxation (JCT).

The JCT score is an estimate of how much a proposal will raise or lower projected government revenues, usually over 10 years, a crucial factor due to the large federal deficit.

JCT scores are based on projected alterations in taxpayer behavior due to tax law changes, but not on changes in the broad economy. For instance, standard JCT scores hold gross domestic product (GDP) constant. GDP measures the economy’s total output.

Dynamic scoring, as Republicans urge, would include projected macroeconomic impacts in JCT scores. JCT is already doing some of this work, under orders from Congress from 2003, in supplemental materials it issues, but it does not include the results of dynamic scoring in official scores.

George Yin, a former JCT chief of staff, raised questions such as whether JCT could do dynamic scoring quickly enough to satisfy Congress’s often tight time frames for action. “There are practical issues that would have to be resolved,” he said.

Republicans hope incorporating dynamic scoring more centrally into JCT’s work would produce scores that reflect claims that tax cuts sometimes pay for themselves by stimulating the economy and generating new government revenues.

Some, but not all, Democrats say such effects are uncertain and that Republicans want more dynamic scoring so their tax cutting agenda no longer appears to balloon the deficit, as it does under conventional scoring.

Further, critics say, making dynamic scoring more central would degrade JCT’s scores because long-range macroeconomic forecasting is so difficult and imprecise.

To impose changes at JCT, Republicans would have to keep House control and win control of the Senate, where Orrin Hatch would likely take over the tax-writing panel. "Senator Hatch has and will continue to support the use of macroeconomic analysis for major reforms," said his spokeswoman Julia Lawless.

(Additional reporting by David Lawder; Editing by Lisa Shumaker)

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