When analyzing the effect of tax law changes, such as those related to charitable giving, two divergent methods emerge to predict the effects of proposed changes. Static scoring predicts that as tax rates increase so does government revenue, and as they decrease so does revenue. Dynamic scoring predicts the opposite, with increased taxes resulting in decreased revenue and decreased taxes resulting in increased revenue, because behavioral reactions to the change cause the opposite effect. The Joint Committee on Taxation (JCT) uses static scoring while the House of Representatives uses dynamic.
See Conrad Teitell, Charitable Gifts: Tax Reform?, Wealth Management, March 30, 2015.
Special thanks to Jim Hillhouse (Professional Legal Marketing) for bringing this article to my attention.
