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There is of course one way out of this dilemma: assume that the tax cuts being proposed will stimulate economic growth, generating new revenues for the federal coffers to offset the revenues lost by the cuts. It’s called “dynamic scoring”. Respectable economists, so-called supply-siders, believe the revenue-generating effect of lower corporate taxes will enable the Trump cuts to pay for themselves. Others, such as this writer, agree that lower rates might stimulate an increase in work, risk-taking and economic growth, but worry that the magnitude of the sustained impact on tax receipts is insufficient to make up for all lost revenues. New revenue sources are needed to keep the deficit from ballooning.

That leaves Trump and Congress not only with the pleasant necessity of lowering rates, but also the less pleasant one of devising such other changes in the tax code that, in combination with the rate reductions, will make America competitive again. They must contend with three distinct factions in the House of Representatives, the body charged by the constitution with originating all revenue bills. Establishment Republicans, led by Speaker of the House Paul Ryan, are willing to go along with the President’s demand to cut corporate tax rates and to increase spending on the military, but want to offset the revenue losses by reducing the scale and scope of the welfare state. Which Trump has pledged not to do. Democrats regard Ryan’s plan as a policy suitable only for warmongering Grinches who would rather spend $1 million on a single Tomahawk missile than on food and housing for thousands of poor families. Then there is the Freedom Caucus, a sort of third party with its members masquerading as Republicans. This rump group of Republican congressmen is the rough equivalent of John Major’s “bastards”, although outnumbering the beleaguered former PM’s enemies in his own party by a large enough number to have succeeded in shooting down the Trump/Ryan version of “repeal and replace” Obamacare.

Each of these parties generates numbers to prove that its plan is revenue neutral. Unfortunately, even numbers generated by well-intentioned experts are subject to wide margins of error. They represent projections of the revenue effects over the coming decade, and ten years is a long time for forecasters whose quarterly projections are often far off the mark; they assume no other changes in government policy that might affect the deficit; they are based either on the false assumption that the behaviour of economic actors is unaffected by changes in their take-home, after-tax incomes, or on the assumption that we can quantify that impact with some reasonable degree of precision.

But consider the sad state of economic theory. Some economists say that increasing take-home pay by lowering taxes encourages work and risk-taking. Others argue that many economic players have income targets and will work less when they can more quickly reach those targets, a phenomenon I found to be the case when increases in taxi rates I proposed in New York City, in the hope of increasing the supply of cabs at night, allowed drivers to say “enough is enough” earlier in the evening, reducing the supply of cabs. So quantifying the revenue effect of tax cuts is somewhere between informed guesswork at best, and estimates doomed to miss the mark by orders of magnitude at worst.

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