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What’s really meant by Dynamic Scoring

GIVEN that The Guardian 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!

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Posted: 29th, March 2012 | In: Money | Comments (3) | Comments RSS feed:RSS 2.0