In that favorite family movie classic The Wizard of Oz, a quartet of unlikely friends travel over hill and dangerous dale to the source of ultimate wisdom — a popularly acclaimed “wizard” who has all the answers. After risking their lives to get to this fount of wisdom, the four friends find out that he is really a failed vaudevillian who has a deft hand with sound effects and visuals. Pulling back the curtain showed how great a gap there sometimes is between reality and perception.
In our nation’s capitol, Oz is alive and well. The “wizard” is a group of revenue estimators at the Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO). Every aspect of American life, from the levels of federal spending on homeland security, education, health care, and environmental protection to the level of taxation Americans are required to pay is determined by the budget or revenue “scores” these mathematical magicians derive. Republican or Democrat, freshman or committee chairman, all are at the mercy of the official price tags affixed to their legislative priorities by JCT and CBO.
Don’t get me wrong. Knowing how our fearless leaders in Congress are spending our tax dollars is crucial. The problems creep in and spread like kudzu because the methods, models, assumptions and procedures CBO and JCT use for deriving revenue estimates are not publicly disclosed even to Members of Congress. How do we — much less our elected representatives — know if these all important price-tags are correct if the estimators don’t do what we all had to do in grammar school: show the math.
The secrecy shrouding JCT’s and CBO’s methodology is contrary to the principles of good government. Moreover, it may lead Congress to enact legislation that is not in the best interest of America. While I believe this information should be made available to every taxpaying citizen, at a minimum it should be disclosed to Members of Congress so they can educate their constituents. It also will allow Members and outside experts to critique the methodology, thus ensuring that the most rigorous economic disciplines are being employed in deriving the estimates. Right now, there appears ample evidence that this is not the case.
Let’s look at one recent example. Last year, the Joint Committee on Taxation calculated the cost of — or, “scored” — The Estate Tax Elimination Act of 2001. This bill repealed the gift, estate, and generation skipping tax. Even though the expected revenue from this tax was an estimated $350 billion over the next 10 years, the JCT concluded that the “cost” — or loss in revenue — attributable to repeal of that tax was almost twice that amount, $662.2 billion. It is fine mathematical wizardry indeed to put the repeal price tag at almost double what the tax raised in the first place. Doesn’t anybody want to pull back the curtain?
Apparently, the answer is yes. A growing group of policy experts believe it is time for transparency in revenue estimating. Draft legislation is circulating that will simply require that Members of Congress be given access to information that explains how JCT and CBO derive their revenue estimates. This is a profoundly sensible step toward ensuring accuracy and accountability among the JCT and CBO wizards toward the Members they serve and the taxpayers who pay their salaries. Moreover, transparency in scoring will increase the confidence in the fairness and accuracy of the revenue estimating process. Instead of being scared and defensive about such a development, JCT and CBO should welcome it.
If this is such an obviously good idea, why didn?t it happen years ago? The answer is both simple and somewhat difficult to believe outside our nation?s capitol. Congress is scared of the wizards. Anyone who challenges the status quo risks having each and every one of their own legislative priorities given a vastly inflated price tag. How could that happen? As a professional economist, I can tell you it is distressingly easy to manipulate numbers. When I was a graduate student, one of the faculty had posted on his door a mathematical ?proof? that two plus two equaled five. To someone who likes numbers, its reasoning was as elegant as any musical score. It only had one flaw: It was completely wrong.
This ?sunshine in scoring? legislation is well overdue. With the risk to politicians who champion it, however, it is likely to fail without the support of one very powerful voice in America: the media. If the media picks up the chant of ?show us the money? the legislation will succeed. Without that crucial support, this admirable legislation may die because of a rampant case of hostage mentality among our elected officials.
On April 29, we reached Tax Freedom Day — the day that the average American’s salary is no longer going to pay taxes. Wouldn’t it be nice if Congress were to give Americans a meaningful bipartisan gift and decide to pull back the curtain? Considering all that we give our government, it’s the least they can do in return.