WASHINGTON — Using dynamic scoring, the Joint Committee on Taxation has estimated that legislation to extend tax provisions, including several related to bonds and Puerto Rico, would result in only $86.56 billion of revenue losses, compared to its earlier estimated $96.95 billion.
Dynamic scoring takes into account the economic growth that would be generated from extending some of the tax provisions to help offset their cost.
While the revenue estimates stay the same for the bond- and Puerto Rico-related provisions, the overall drop of about $10 billion of projected revenue losses would make it easier for lawmakers to pay for bill.
The bill, which the Senate Finance Committee passed by a vote of 23 to 3 on July 21, is expected to be taken up by the full Senate for a vote after Congress returns from its summer recess on Sept. 8.
In its earlier report, JCT found that, overall, the bill to extend dozens of tax provisions through 2016 would result in about $97.11 billion of revenue losses and $168.0 million of revenue gains for a net $96.95 billion of losses between fiscal years 2016 and 2025.
But using dynamic scoring, the report factors in more than $10 billion in net revenue gains for "additional effects resulting from microeconomic analysis." JCT said in an explanation of the budgetary effects of the bill that the growth generated by "the increase in capital stock" would increase revenues by about $17.2 billion over the 10-year period. It did not specify where the gains would come from, but sources the likely cause would be the extension of bonus depreciation provisions. Offsetting this would be $6.8 billion in increased costs from an expected rise in federal debt and in the cost of federal debt service, according to JCT.
But the revenue-estimating committee said that in the second and third decades after enactment of the bill, there would be a net increase in federal debt, which would make private borrowing more expensive.
In footnotes to its budget chart, JCT said the nearly $10 billion would include $6.79 billion from the "effects on outlays due to increased interest rates on the federal debt" and $3.06 billion from "off-budget effects," for a final total of $86.56 billion of revenue losses.
The bond- and Puerto Rico-related tax provisions that would be extended would still result in almost $7.97 billion of revenue losses, according to JCT.
The biggest revenue loser among the bond and Puerto Rico provisions is one that would allow taxpayers in their 2015 and 2016 tax years to deduct state and local general sales taxes instead of state and local income taxes. JCT estimated that extending that provision would result in $6.70 billion of revenue losses over ten years.
The next biggest from a revenue standpoint is a provision that would extend empowerment zone designations and allow certain distressed communities to remain eligible for tax incentives, including the issuance of enterprise zone facility bonds. JCT estimated this provision would cost about $647.0 million of revenues over ten years.
A provision to extend a $400 million national volume limitation for qualified zone academy bonds for each of 2015 and 2016 and ease one of the limits for QZAB issuers would lead to $258 million of revenue losses over 10 years, JCT said.
JCT estimated $336 million of revenues would be lost over 10 years from a provision to temporarily increase to $13.25 from $10.50 per proof gallon the limit on the amount of excise taxes on rum that are covered over to Puerto Rico and the U.S. Virgin Islands.
Another provision that would allow a domestic production activities deduction to be applied to activity in Puerto Rico through 2016 would cost about $234 million over 10 years, JCT said.
