Anorak | What’s really meant by Dynamic Scoring

What’s really meant by Dynamic Scoring

by | 29th, March 2012

GIVEN that The Guardia n has already given us the screaming hysterics article about this dynamic scoring of tax changes perhaps it’s about time someone explained what is really going on?

OK, starting right at the beginning, the most important thing to know about economics is that incentives matter. Changes in tax rates are changes in incentives so they matter.

When we do static analysis of tax changes we just assume that no one changes their behaviour in response to these changes in incentives. YUoiu know, like everyone would keep smoking the same mount if ciggies went up by another £5 a pack tomorrow? And there definitely wouldn’t be any smuggling in from the Continent, no Siree!

Well quite, that’s totally mad doing it that way. So, what we want to do is dynamic scoring. So, what’s our best guess about what people are going to do if we change tax rates? So, well, you know, so we can work out how much tax we’re going to get from changing them?

No, this definitely can be abused because you do have to make assumptions and amazingly assumptions seem

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Posted: 29th, March 2012 | In: Money Comments (3) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink