Congress Shouldn’t Let Flawed Tax Models Block Pro-Growth Reform

When Congress considers significant tax legislation, much of the conversation quickly turns to “the score” — the official revenue estimate produced by the Joint Committee on Taxation (JCT). These estimates often drive or kill reform, sometimes before the merits of a policy are debated. However, there’s a serious problem: JCT’s scoring models are deeply out of step with economic reality.

Nowhere is this disconnect more glaring than in the scoring of tax cuts and, specifically, the estate tax, sometimes referred to as the “death tax.”

For years, economists and analysts have pointed out that the estate tax — long sold as a revenue-raiser targeting the ultra-wealthy — may actually lose money for the federal government. A new study, by Steve Moore, who has served as an outside economic adviser to President Trump, and Pavel Yakovlev of Duquesne University, shows that for every dollar the estate tax raises, it reduces revenue from income, gift and capital gains taxes by up to five dollars. 

Why? Because the estate tax reduces capital stock in the economy and incentivizes costly avoidance behavior — from shifting wealth into tax shelters like foundations that are exempt from taxes, to reducing capital gains realizations. It distorts investment and labor decisions in ways that drag down economic growth and productivity.

Despite this, JCT continues to treat the estate tax as a static revenue stream, as if taxpayers and businesses don’t respond to its presence. Even more troubling, JCT fails to account for the drag the estate tax places on small and family-owned businesses — the backbone of the American economy. 

Family businesses provide 49.1 million American jobs. These businesses pour millions into estate planning, legal fees and life insurance yearly to survive the tax — money that would otherwise be used to expand, hire and invest in their communities.

This problem goes beyond the estate tax. JCT’s scoring model routinely underestimates the positive economic effects of well-structured tax cuts. It assumes a near-zero response from businesses and workers, ignoring real-world incentives that drive investment, productivity and job creation. The idea that lowering marginal tax rates or reducing burdensome taxes will have little to no business and job-

killing effect is not only outdated — it’s demonstrably wrong.

We saw this after the 2017 Tax Cuts and Jobs Act, which JCT predicted would significantly increase the deficit. In reality, federal revenues surged above expectations in the following years, driven by faster economic growth, higher wages and repatriated earnings. Dynamic scoring — which accounts for behavioral and macroeconomic responses to tax changes — is supposed to help correct these blind

spots. But JCT’s use of dynamic modeling remains limited, opaque and far too nearsighted in its assumptions.

Congress should not be bound by models that fail to reflect real-world behavior or economic principles. Pro-growth tax reform is impossible when scoring assumes a static economy and a passive public. If tax cuts are scored as massive losses regardless of their likely benefits, then good policy never gets off the ground.

It’s time for a reckoning. Either JCT must modernize its scoring methods to reflect empirical data and dynamic realities, or Congress should make the necessary personnel and structural changes to ensure it does. Lawmakers rely on these numbers to craft the best possible policy. Right now, those numbers are steering them wrong.

Family businesses — and the American economy — should not be held hostage by flawed models and outdated assumptions. Congress owes the public a tax system based on growth, fairness and accuracy. That starts with a JCT that’s grounded in reality, not rigid theory.