Congress’ Way of Estimating New Taxes Inefficient
Imagine your favorite business in town – let’s say Pop’s Pizza Shop – raised its low prices from $0.99 a slice to $2.50 a slice, and from $9.99 for a medium pie, to $15.99 for the same medium pie. There is no competition in town for Pop, which is why he felt confident that raising his prices would bring him more revenue. However, what Pop did not take into consideration was that half the reason the townspeople loved his pies wasn’t for their wonderful taste – it was for their wonderful prices. And now that Pop raised his prices – some by more than double! – people aren’t eating there as often. It doesn’t take Pop long to realize that he isn’t making money off of his new prices, but rather, he’s losing money.
Now, imagine this situation on a much grander scale – like, with the government for instance.
For as long as taxes have been around, Congress has been estimating the cost of new tax policies based off of a static scoring approach. What this means is that Congress has been trained to think that no matter how high they raise the taxes or how low they drop them, the cost of taxes will have no bearing on the economy whatsoever. However, the tax policy does claim that raising or lowering taxes will have an effect on individuals. My thoughts? How can taxes affect individuals and still leave the economy untouched?
The answer? They can’t.
When taxes go up, consumers and businesses hurt. And when consumers and businesses hurt, the economy hurts.
The same holds true when taxes are lowered: when taxes drop, consumers have more money to spend, therefore, increasing businesses’ revenue. When businesses have more money to spend, they hire more people, and the positive cycle continues.
So, the “static scoring approach” that Congress has maintained and which they vow to be the best method of scoring is actually completely bogus. So, where does that leave us?
Junior Senator from Ohio, Rob Portman, has an idea…http://thehill.com/opinion/op-ed/206689-give-congress-more-accurate-tax-information
Let us know what YOU think!