Joint Tax Committee Releases Two Reports

The Joint Committee on Taxation has released two reports:

• Macroeconomic Analysis of a Proposal to Broaden The Individual Income Tax Base and Lower Individual Income Tax Rates (JCX-53-06):

This document ... provides an analysis of the macroeconomic effects of a proposal to modify the individual income tax by broadening the tax base and reducing statutory tax rates. In particular, the proposal would eliminate exemptions and reduce deductions and credits. It would reduce tax rates and repeal the AMT. The proposal is approximately revenue neutral as measured by the conventional revenue estimate over the current 10-year budget window.

• Background Information About the Dynamic Stochastic General Equilibrium Model Used by the Staff of the Joint Committee on Taxation in the Macroeconomic Analysis Of Tax Policy (JCX-52-06)

This document ... describes a new model developed by the Joint Committee staff for use in analyzing how changes in tax policy may affect the nation’s economy. In analyzing the macroeconomic effects of tax policy proposals, the Joint Committee staff uses several different models to account for the sensitivity of the analysis to different modeling assumptions. Three of these models, the Joint Committee macroeconomic equilibrium growth model (“MEG”), the overlapping generations lifecycle model (“OLG”), and the Global Insight econometric model (“GI”) have been described in other Joint Committee staff documents. The Joint Committee staff has recently begun using an additional model, a dynamic stochastic general equilibrium neoclassical growth model with infinitely lived agents (“DSGE”). The Joint Committee staff welcomes comment on this model.