Dynamic Changes for Evaluating Budgetary Impact of Proposed Legislation

On January 6, the House adopted rules that require the Congressional Budget Office and the Joint Committee on Taxation to use macroeconomic or “dynamic” scoring in forecasting the budgetary impact of proposed legislation. Under this system, which is a change from the previous “static” scoring methodologies, calculating the forecasted fiscal impact of major legislation will consider factors such as employment, economic output, and inflation. Proposed legislation triggering dynamic scoring must be “major,” which the rules define as having a budgetary effect of more than 0.25% of actual or projected gross domestic product, or legislation that the chairs of the House Budget Committee or Joint Committee on Taxation designate as major legislation.

The dynamic scoring rules apply to both revenue and spending legislation. Given the renewed interest and rhetoric surrounding tax reform, dynamic scoring may provide additional arguments for lawmakers in support of tax reform agendas. However, in the case of revenue legislation, there is fundamental disagreement about whether tax cuts lead to higher economic output that counteracts lost revenues. This may limit any benefit from dynamic scoring analysis.

Read more in The Hill and Politico.

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