Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Posted by taxguru on September 18, 2002

More Realistic Look At Tax Law Changes

I have ranted & raved for decades about how unrealistic are the analyses by our rulers in DC of the effects of tax law changes. They are always completely wrong, mostly because they use static analysis, which assumes that the real people in the country won’t alter their behavior any in response to tax law changes. It’s absolute garbage and only useful for the demagogues to do their own ranting & raving against letting people keep any more of their own money. Those are the imbeciles who, still to this day, blame the huge budget deficits on the Reagan tax rate cuts, when with perfect 20/20 hindsight, it is clear that those cuts stimulated the economy and generated twice as much in tax revenues as there would have been with the previous higher rates. Real life facts mean nothing to those people.

It has been a long uphill battle to convince our rulers to use a dynamic method of guessing future numbers, taking into account that people will change what they do as tax laws change, such as more business activity when rates are lowered. Now, it seems that some of our rulers will be looking at dynamic figures in addition to the worthless static ones that the liberals prefer. While this is definitely a step in the right direction, it must be pointed out that even the dynamic scoring models are nothing more than guesstimates. Changing from static to dynamic analysis will really be no different than changing from the WAG (wild ass guess) to SWAG (scientific wild ass guess) technique of financial forecasting. To date, nobody has come up with a truly accurate crystal ball to predict future government finances; which is why it will still grate on my nerves to hear people cite official government forecasts as if they are gospel.


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