Illustration from photo by Robin MayIt would be wrong to say that Gov. John Bel Edwards commercial activity tax proposal was dead when he introduced it less than two weeks prior to the start of the current legislative session. That's because, technically, the governor didn't know how much revenue it would raise when he introduced it.
It wasn't until a week after the session opened on April 10 that Rep. Sam Jones of Franklin introduced the Edwards CAT as HB628 that details were finalized on the bill. By that time, projected revenue generated by the proposed tax had dropped precipitously.
"When the governor first introduced it, it was supposed to generate about $1 billion in revenue," according to Rep. Cameron Henry, chairman of the House Appropriations Committee. "By the time the bill got to Ways and Means, revenue was down to about $288 million. That was his own plan. The numbers changed that much inside his administration over about a three-week period."
Henry was in the House in 2013 when prior to that session then-Gov. Bobby Jindal proposed a sweeping overhaul of state tax policy, Jindal's plan was also complex, but it would have eliminated the state income tax on individuals and corporations and replaced it with an expanded and increased sales tax. Jindal, who by that time had lost budget credibility with both Democrats and many in his own party, announced in his address to the joint session of the Legislature that he was withdrawing the plan.
Rep. Jones pulled JBE's HB628 from consideration by the Ways and Means Committee after two days of testimony in which it became clear that the bill would not get the votes needed to make it to the House floor.
Henry believes Jindal and Edwards looked to the wrong people for tax advice. He thinks that if either of the governors had turned to CPAs and started their respective reform efforts far in advance of the start of the legislative sessions in which their plans died, there was a slim chance that things could have worked out differently.
"I think the issue that the members have — and I can't speak for the whole body — is that when you're dealing with the fluctuations in revenue from the Revenue Estimating Committee and from the fiscal notes, it's hard to gauge what it is you're trying to fix," Henry explains. He was interviewed on the topic last week in his 11th floor office in the Capitol.
"We're trying to fix the tax code, to make it simpler," Henry continues. "Then, in good faith, try to make it simpler. If you're trying to make it cleaner, then try to make it cleaner. If you're trying to do that while also trying to raise revenue, that's where things get confusing."
Henry says fiscal notes on bills have varied wildly on similar bills containing the same kinds of taxes from session to session.
"All the variables make members nervous," Henry, who has served in the House since 2007, says. "That's the concern. The reason people have CPAs and accountants is because they don't understand the full breadth of every detail of the tax code."
Henry says legislators frequently turn to their own CPAs and/or accountants to help them understand the implications of tax policy.
"At the end of the day, when a bill gets to the floor, that is going to affect someone's tax bracket," Henry explains. "Most members, or a good bit of the members, pick up the phone and call either their own CPA or a friend they know that does books and asks 'is this going to be a good or a bad idea?' We go to people who know more than we do to change the tax code."
Because of the sensitivity and complexity of the issue, Henry believes both Jindal and Edwards were not patient enough in formulating and selling their respective proposals to legislators.
"To change the tax code, you need to start this session to get something done 18 months from now," Henry declares. "That way members can not only understand it themselves but have it presented in a manner that can enable them to articulate it to someone else."
Henry says the House had a member who was excellent at translating tax policy for fellow members — former representative, now LCG Mayor-President Joel Robideaux.
"He was an accountant but he also knew how to explain to non-accountants what was going on," Henry says of Robideaux. "That's one of those issues where the administration needs someone like that on their team who can break some complex tax reform issue down into a manner that you can repeat to someone else and they can understand it. It's a difficult skillset."