Recent discrepancies in the Congressional Budget Office’s projections.
Misestimations in Recent Tax Legislation Projections
In 2025, Washington will focus on tax laws spending and the debt limit. The accuracy of the Congressional Budget Office (CBO) in predicting economic impacts is in question. Examples include the CBO’s $366 billion estimate for the Inflation Reduction Act later revised to $1.6 trillion by Goldman Sachs. Similarly, the CBO’s forecasted $1.45 trillion revenue reduction from the Tax Cuts and Jobs Act of 2017 differed from actual outcomes, according to the report of Washington Times.
(photo: LinkedIn)
Evaluating the Accuracy of CBO Projections
From 2018-2023, federal tax revenue matched the CBO’s pre-TCJA estimates and is expected to be $620 billion higher by 2025. The TCJA boosted the economy, with real GDP exceeding estimates by $4 trillion and projected to be $12 trillion higher by 2025. Real wages and salaries also exceeded estimates and are expected to be $3.6 trillion higher by 2025. Despite CBO’s initial predictions, the TCJA spurred economic growth and increased revenue, suggesting flaws in the CBO’s scoring system and highlighting the need for accurate tax policy projections.
