The Politics of Fictional Expectations: Dynamic Scoring, Revenue Forecasting, and the Kansas Tax Cuts

Daniel R. Alvord, Northeastern University

Joseph Schumpeter once claimed that “the budget is the skeleton of the state stripped of all misleading ideologies.” However, instead of being stripped of ideology, public finance budgets increasingly reflect ideological commitments. This has been particularly true with a series of supply-side fiscal reforms undertaken in the U.S. since the 1980s. Supply-side as an ideology posits that deep cuts in taxes will generate economic activity sufficient to pay for the initial tax cut. Supply-siders, however, do not merely conjecture that growth will occur as a result of tax cuts, they increasingly build economic forecasts predicated upon the hope of future growth. In this way, budgets and budgetary actors are not stripped of ideology but are constructed using misleading ideologies. This paper uses the case study of the 2012 Kansas income tax reforms to explore the production and use of “fictional expectations” in public finance budgeting. I focus specifically on the politics of dynamic scoring. Dynamic scoring attempts to estimate the effects beyond just the initial cost to government. However, dynamic scoring is highly vulnerable to political pressure since it must rely so heavily on assumptions of how the economy works and as well as assumptions on how monetary and fiscal policy impacts the economy (Auerbach 2005:422). Reliance on these assumptions increases the role of human judgement and ideology. Drawing on the Kansas tax cutting case, this research asks in a context in which a forecasting model confirms prior views of the economy, how are lawmakers supposed to properly evaluate it? How can a tool that can be used to confirm prior biases be evaluated? Drawing on ethnographic observations of tax committee hearings, document analysis, and interviews with lawmakers, this paper investigates how lawmakers interpret the data and models produced by different techniques and different groups.

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 Presented in Session 47. Facts and Fictions: Expert Ideas in the Politics of Public Finance