Dynamic Scoring

You ever see Russell Westbrook take it coast to coast? Or just watch YouTube clips of Michael Jordan's vintage dunks? You might think it's exciting, but that's nothing...we're here to talk about tax policy.

"Scoring" in this sense has nothing to do with sports and very little to do with a well-spent Saturday night (unless you happen to dream about working for the Congressional Budget Office). It has to do with predicting the impact of proposed changes to the tax code.

When Congress looks to pass a new tax bill, the provisions get broken down by a bunch of government accountants. Using fancy math to produce their dynamic score, the bean counters estimate how the new tax rules would impact the economy, and how they would alter government revenues.

This process involves more than just the dollar values that would change directly because of the new taxes (like, lower taxes would lead to lower government revenue). Instead, it seeks to take into account secondary effects as well...like, lower taxes will leave people with more money to spend, which will stimulate the economy, which will lead to more jobs, which will lead to more total income to be taxed, which will lead to more taxes being collected. That's the "dynamic" part of this technique: trying to predict all the subtle ways that people will react to the new tax structure.

The techniques are complicated, and can be controversial, Also, the predictions often prove inaccurate. But even with its flaws, dynamic scoring has become a key part of reviewing proposed tax policy.