When Gutting A Tax Board Is Actually Bad For Taxpayers
California's Board of Equalization is the only tax board in the nation with elected representatives.
When I first learned about the existence of something called the California Board of Equalization (BOE), it sounded like something that might have existed in the novel, "Animal Farm." All animals are equal, but some are more equal than others. Few things sound more totalitarian than a government agency in charge of equalizing things.
But California's BOE, founded in 1879, simply is a banal tax board that oversees collection of the state's sales and excise taxes. It also handles appeals of the state's income and corporate taxes. The "equalization" has nothing to do with equalizing Californians' financial status, but making sure "that county property tax assessment practices were equal and uniform throughout the state," according to the agency's own description.
Currently, it's the only state tax bureau in the nation run by elected officials. The board has four elected members who represent large districts, plus the state controller. It has a staff of more than 4,000 people and offices across the state. There have been multiple efforts to eliminate the agency over the years, and in the wake of a series of recent problems, it looks like the agency finally is having its powers drastically reduced.
California legislators recently approved some urgency bills that are part of a budget deal that will surely be signed by the governor. One such bill takes away most of the board's powers and replaces them with two new departments. The first agency will collect taxes and fees, explained the Sacramento Bee. The second will serve as a tax court run by administrative law judges. Almost all of the BOE employees will work under the new agencies.
Columnist Dan Walters argued in April, following a Department of Finance audit that was highly critical of the BOE, that it's time for the board to go away after allegations "such as spending lavishly on personal offices, misusing civil service workers and interfering with pending tax cases." Board members, he added, treat these elected posts as "well-paid sinecures or stepping stones to higher office."
As a limited-government guy, I should be applauding the board's dismemberment. We're talking about gutting a tax board, which should be every libertarian's dream. Few politicians really aspire to be members of the Board of Equalization, so Walters has a point about sinecures and stepping stones. Nevertheless, gutting the board is terrible news for taxpayers.
"It's the difference between being represented by elected officials who are accountable to the people in their district or the IRS model," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. He doesn't downplay the problems at the board, but argues that the Democratic-dominated legislature targeted the BOE mainly because "it is perceived as too taxpayer-friendly." Indeed, Republicans wanted the board to retain its powers.
"People still need representation for taxation," said BOE member Diane Harkey, whose fourth district represents Orange, Imperial, Riverside, San Diego and parts of San Bernardino county. "People don't have the time and resources to fight a tax agency with unlimited resources." She said the agency's problems could have been corrected. "Did they shut down the Senate?" she asked, after three senators faced criminal charges.
Indeed. Elected board members—perhaps given their interest in higher office—and their staffs frequently serve as advocates for the lowly taxpayer. Sure, the new agencies will have an adjudication process by which taxpayers can appeal their cases. But "administrative law judges" are not actual judges. They are agency employees. Would you want to throw yourself at the mercy of some faceless regulatory entity or an agency accountable to elected officials?
I know what I would choose. The current system works a little like a congressional office. There's no saying your U.S. representative will be able to help you, but you're more likely to get help from Congresswoman Whatshername than you are by sending letters to an unknown functionary in a governmental department.
Furthermore, elected board members have been sensible voices on important matters of tax policy. For instance, Board of Equalization member George Runner, a Republican, and Fiona Ma, a Democrat, have called for user-friendly tax rules for marijuana dispensaries. Currently, these businesses aren't allowed to have bank accounts under federal law, but are supposed to pay taxes. Yet it's frowned upon to show up at BOE offices toting bags of cash.
One rarely finds innovative policy solutions offered by unelected tax officials, who by the nature of their position rarely rock the boat or challenge current rules. Spend some time on the BOE website. So much of it is devoted to helping taxpayers navigate the system and exert their rights. At appeals hearings, elected officials often ask tough questions of the bureaucrats.
Sure, it's a tax board that wants to collect our money. We shouldn't get too maudlin about it. But I feel more equalized knowing there's an elected official to turn to if I have a tax problem.
This column first appeared in the Orange County Register.
