- Associated Press - Sunday, June 29, 2014

INDIANAPOLIS (AP) - Tax experts and conservative thought leaders who gathered at Gov. Mike Pence’s tax summit last week focused on everything from broad concepts of tax simplification to the minutiae of credits, deductions and other tax items. But something else came to the fore throughout the conference: winning the public’s trust.

During a discussion of tax simplification, John Ketzenberger, president of the Indiana Fiscal Policy Institute and a former Statehouse reporter, asked, “How do we convince the public we’re telling them the truth?”

It’s a baseline issue for any representative democracy — ensuring the public trusts what its elected representatives are doing — and at the heart of much national cynicism, at least based on routine gauges of public attitudes toward politicians, such as congressional approval ratings. (Attitudes toward Indiana’s state-level politicians might be different, but public polling has not been done on that question the same way it has at the national level.)

Grover Norquist, a conservative thought leader and well-known anti-tax activist, said that when Congress and former President Ronald Reagan worked on the last major national tax reform in 1986, one of the fears was that a tax increase would be slipped in.

“There are just enough moving parts - you know, like the three-card Monte guy - to make you not see the billion-dollar tax increase,” he said.

Such concerns are valid as Pence heads into 2015 with talk of simplifying the state’s tax code. Jim Eads, a Dallas-based tax consultant who used to head the Federation of Tax Administrators, said that any talk of tax reform needs to begin with earning the public’s trust.

“Probably the most fundamental question that you have to confront when you start talking about a tax reform effort is trust,” he said. “Many in the electorate do not trust government. They don’t trust what their elected leaders say to them. And so, they may not be willing to follow the pristine logic that we can demonstrate if they would listen.”

The public trust question is not just an exercise in theory. A pair of major tax mistakes discovered in late 2011 and 2012 caused then-Gov. Mitch Daniels to shake up the leadership at the Department of Revenue, the state agency charged with collecting taxes.

When Daniels announced in December 2011 that the state had lost track of $320 million in corporate tax collections, he downplayed the significance, treating the discovery of the money as an early Christmas present at a press conference. Democrats immediately called for an independent audit but were rebuffed by Republicans who saw a one-time problem at the state’s Department of Revenue.

A few months later, while conducting their own review, state officials discovered they had also accidentally withheld $206 million in income tax distributions to local governments.

The problems were blamed on computer programming, an antiquated system of technology and a lack of agency oversight. Leaders of the State Board of Accounts, which typically audits state and local finances, told members of the State Budget Committee at the time that they lacked the ability to conduct the necessary information technology audit.

The details of what Pence wants from his overhaul are unclear just yet. He said at the tax conference last week that he just wants to start the discussion, but can guarantee he won’t support any change that includes a tax increase. But winning the public’s support for any tax reform, Eads said, will require transparency.

“That trust has been lost over many years and is not going to be regained instantly. It’s going to have to be rebuilt,” he said. “And so everybody’s talked about transparency. I think that’s an essential part of that trust you’re trying to rebuild. If they begin to trust you, they will begin to listen to the policy arguments that have to be made.”

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