Notice & Comment

For Tax Reform Estimates, Don’t Look to CBO, Look to JCT, by Sam Wice

The shift in focus from healthcare to tax reform will mean that the little known Joint Committee on Taxation (JCT) will soon play a starring role. During discussions about healthcare reform, the Congressional Budget Office (CBO) played an important role in estimating how many people would be insured under competing Republican proposals. With the shift to tax reform, a little known agency with most of its offices one floor above CBO will make the cost estimates for tax refor. While CBO estimates the impact of most legislation, it does not impact direct changes to taxes. Instead, JCT estimates tax proposals and will play a central role in tax reform.

Much of JCT’s role is obscured because it usually works closely with CBO on estimates. Where legislation incorporates both tax and non-tax components, CBO will incorporate the tax estimates from JCT into a joint CBO/JCT estimate. Because these estimates appear on CBO’s website with CBO’s letter-head, many do not realize that JCT also plays an important role in the estimate. For instance, descriptions of the recent healthcare estimates generally only mention CBO even though the name JCT appears 41 times in the most recent CBO estimate for healthcare reform.

While JCT is similar to CBO, it has several notable differences. First, JCT has existed long before CBO. While CBO started in 1974, JCT started in 1926. Second, JCT uses a committee staff structure. Unlike CBO’s agency structure with a director appointed by Congress, JCT is a congressional committee composed of democrats and republicans from both houses of Congress. The chairman of the House Ways and Means Committee and Senate Finance Committee take turns chairing JCT. Compared to most congressional committees, the committee’s staff is nonpartisan, without distinction of majority and minority staff. Effectively, the organizational structure of CBO and JCT staff is the same.

Although the upcoming tax reform estimates might appear on CBO letterhead, they will largely be JCT estimates of how much revenue will be lost or gained through any tax proposal. It will largely be JCT, not CBO, whose estimates are essential to determining whether tax reform can pass reconciliation by being deficit neutral.

Sam Wice is a former analyst at the Congressional Budget Office and a former Council member of the American Bar Association’s Section of Administrative Law and Regulatory Practice. He may be reached at sam.wice[at]

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