Here’s the audio from Jim’s interview with Ed Morrissey from Hot Air this morning.
Ed’s got plenty to read over on Hot Air on a daily basis and his weekly column over at American Issues Project. His column today dives into static and dynamic analysis of tax policy – which really is an easy topic to understand – and how Sen. Max Baucus’ (D-Mont.) health care legislation proposal is a good example static tax policy analysis.
When considering tax policy, analysts can choose from two basic methods to determine how policy will affect revenues and industry. The first, used by many politicians, is static analysis, which assumes that tax policy has no effect on consumer and investor behavior. This kind of analysis is far simpler, because it relieves the analyst from the consequences of the policy in question. If one raises taxes by five percent, as an example, one can then look at the previous year’s revenue from those taxes, add five percent, and present the results as the predictable outcome of the tax increase.
The second approach is called dynamic analysis, which presumes that tax policy changes will affect consumer and investor behavior in the marketplace. If capital gains taxes decrease, for instance, dynamic analysis would predict higher revenues from the increased amount of investment that gets incentivized by the new tax policy. Other tax cuts would actually increase revenues by encouraging more risk-taking and the stimulation of economic growth. Read more…
On to today’s interview. Jim will have Ed back on in the future.
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