Now that the state’s Tax Reform and Relief Task Force has a consultant in place, we expect to see some big tax policy questions debated over the next few months. The Task Force’s first round of recommendations is due in December.
Last week, the lawmakers heard three consulting groups pitch their services and decided to hire PFM Group Inc. out of Philadelphia.
A notable moment during PFM’s presentation included a question about the group’s ability to perform dynamic scoring of tax changes. They assured the task force that they would have no problem with this type of analysis. This question was significant because dynamic scoring can be tricky – and misleading – depending on how it’s used.
Instead of simply answering how much a tax cut will cost the state in a given year, a dynamic analysis answers the question, “what will the net cost be over time, given its theoretical impacts on the economy?” That leaves a lot of room for interpretation, depending on what kinds of economic theories you subscribe to. Many large personal income tax cuts have been made by states that predicted (wrongly) that the cuts would be balanced out by economic gains according to a dynamic scoring analysis. See Kansas et al.
We don’t yet know how the committee or its consultant will approach these critical questions. Now the real work begins. The next tentative meeting with the consultant is scheduled for October 3rd. The task force is supposed to deliver its preliminary report just a couple of months later.