Former Biden Administration Economists Launch New Budget Lab

Former Biden Administration Economists Launch New Budget Lab


A huge tax fight is looming as a slew of 2017 Republican tax cuts are scheduled to expire at the end of 2025 — and, as Natasha Sarin writes at The Washington Post, the government’s budgetary scorekeepers will play a key role in determining how that fight plays out.

“Analysts at the Congressional Budget Office (CBO), the Joint Tax Committee and other groups ‘score’ the cost of — and savings from — different policy options. How much money would a tax on the rich bring in? How much would eliminating the mortgage interest deduction save? The answers to these questions will impact tax policy for years to come,” Sarin writes.

Sarin, a Post columnist and Yale Law professor who served in the Biden administration as deputy assistant secretary for economic policy and a counselor to Treasury Secretary Janet Yellen, notes that she saw firsthand how those scores can shape — or sink — legislation. But, she adds, while the official analyses projecting the costs of government policies are important, they don’t fully factor in the long-term effects of the programs:

“Take the case of the child tax credit. Scorekeeping merely sees this as a cost because the IRS pays out billions of dollars in benefits to families with children. But it turns out that much of this cost will be recouped by the government in the future. Researchers have found that children whose parents receive cash assistance are more likely to report higher earnings as adults — and pay higher taxes on those earnings. The problem is Congress focuses solely on a 10-year budget window, so the benefits aren’t taken into account. …

To be clear, I’m not saying scorekeepers provide faulty numbers. They don’t. But they are assigned a very particular task to produce revenue estimates over a 10-year horizon. But policies that ‘score’ well today are not necessarily the best policies for America’s future.”

To help address that need, Sarin and economists Danny Yagan and Martha Gimbel, her former Biden administration colleagues, are launching a Budget Lab at Yale. Their new nonpartisan policy research center has issued an initial analysis of policy options surrounding the more than $3 trillion in expiring tax cuts. It concludes that extending the cuts with deficit financing would lead to higher interest rates, greater inequality and a smaller economy in the long run.

Instead, Sarin proposes a tax reform package that raises revenues and reduces deficits. Among its provisions, it allows the 2017 individual rate cuts to expire, raises the corporate rate from 21% to 28%, and expands the Child Tax Credit and Earned Income Tax Credit while simplifying the tax-filing process for many.

“The dollar costs of policies will always be a critical consideration,” Sarin writes. “But long-term gains — for children, emissions reduction and tax simplicity, to name a few — have to be a bigger part of the debate.”