Are Joint Committee on Taxation estimates “static”?
No. JCT estimates include many micro-dynamic behavioral effects that economists anticipate would result from changes to taxation; for example, a proposal to increase excise taxes on cigars would be assumed to reduce demand for cigars while potentially increasing demand for cigarettes. In providing conventional estimates, the Joint Committee Staff assumes that a proposal will not change total income and therefore holds Gross National Product fixed. However, it is important to note that the use of fixed economic assumptions does not prevent the Joint Committee Staff from taking into account that in response to a tax change, economic activity will shift across sectors or markets and/or the timing of economic activity may change. Although conventional revenue estimates are sometimes referred to as “static,” for more than a quarter of a century, Joint Committee Staff revenue estimates have taken into account taxpayers’ likely behavioral responses to proposed changes in tax law. Behavioral e
