The U.S. House of Representative’s leadership has chosen Rep. Paul Ryan to chair the House Ways and Means Committee. In the continuing debate over ways to fund the government and grow the economy, Ryan has remained a longstanding voice for reform.
The House Ways and Means CommitteeThe Committee on Ways and Means, more commonly referred to as the House Ways and Means Committee, is one of 29 U.S. House of Representative committees and is the chief tax-writing committee in the U.S. The House Ways and Means Committee has jurisdiction over all bills relating to taxes and other revenue generation, as well as spending programs like Social Security, Medicare, and unemployment insurance, among others. is the oldest committee in Congress, officially becoming a standing committee in 1802. The committee has the responsibility of raising revenue, appropriations, and banking, powers given to it by Article I, Section VII of the U.S. Constitution. (Read about the history and role of the committee here.)
Rep. Ryan’s role as Chair may have significant implications for how taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. bills are evaluated in the future. Currently, bills are scored on a static basis. This means that a bill’s “score” is the amount it increases or decreases revenue, without considering the effect of the tax change on the economy. This leaves members of Congress without the economic analysis needed to make wise policy decisions. Rep. Ryan has suggested on multiple occasions that Congress should have analysis that considers the economic effects of reforms.
Others, including Senator Orrin Hatch, have also advocated for the use of dynamic scoringDynamic scoring estimates the effect of tax changes on key economic factors, such as jobs, wages, investment, federal revenue, and GDP. It is a tool policymakers can use to differentiate between tax changes that look similar using conventional scoring but have vastly different effects on economic growth. . In an event this week, Hatch made the point that there have been “major developments in the tools that economists use, including the development of dynamic programing and computing.” Hatch further states that not including the economic effects of tax changes is “downright dumb.” He's right.
As we have written here and here, taxes have a strong effect on growth and it’s important to evaluate this relationship when crafting tax reform plans. Dynamic scoring helps policymakers consider the effects of tax changes on the economy. As the tax reform debate moves forward, macroeconomic analysis can provide members of Congress with the information they need to craft policies that grow the economy.
To learn more about dynamic scoring, view information on our Taxes and Growth Model here.
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