On Feb. 2, 1989, our predecessors on The Sacramento Bee’s editorial board wrote: “The Board of Equalization and the Franchise Tax Board are relics of California's past that should have been discarded long ago.”
Calling for its restructuring wasn’t tough then. It’s easier today.
The Board of Equalization serves as a politician’s sinecure. Four board members won seats after they were termed out of the Legislature. It’s also a swamp. Too often, corporations seeking multimillion-dollar breaks on their taxes find ways to slip money into board members’ coffers and evade restrictions on campaign donations.
We return to the slimy subject of the Board of Equalization now because a Department of Finance audit, detailed recently by The Bee’s Adam Ashton, found that the board is unable to explain how it misallocated tens of millions of dollars in tax revenue.
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And this is a board that is supposed to be staffed by green-eyeshade types who understand math and guard our tax money.
In 1989, The Bee’s editorial board pointed out that no fewer than 17 studies up to that point called for the elimination of the Board of Equalization and another tax entity, the Franchise Tax Board.
That was before a board member was charged with 23 felony counts of filing false expense reports, though he pleaded guilty to a single misdemeanor, and before another Board of Equalization member, the late Paul Carpenter, was convicted on a variety of federal charges.
In the 1990s, Gov. Pete Wilson, facing budget deficits, sought to merge the board with the Franchise Tax Board. Gov. Arnold Schwarzenegger took office in 2003 promising to blow up the boxes, and took aim at the tax boards. And yet the Board of Equalization survives in part because many legislators, thinking about the next election, hesitate to abolish an office that pays $142,577 a year.
In the board’s defense, no current member faces criminal charges. But the Department of Finance audit found that board members Jerome Horton, a Los Angeles-area Democrat, and Diane Harkey, an Orange County Republican, misused staff members. Horton and Harkey denounce the audit.
Horton has been down this crooked path before. The Bee reported last year that he used $118,000 in tax money to decorate his Sacramento office with designer furniture.
Bloomberg BNA last year reported that Horton directed hundreds of thousands of dollars in contributions from corporations with issues pending before the board “to or through nonprofit organizations with ties to his wife, Yvonne, who is the elected clerk of the City of Inglewood.” Horton lobbied against legislation last year to curb the ability of board members to direct charitable donations. Not surprisingly, the bill failed.
Board of Equalization member Fiona Ma, a San Francisco Democrat who smartly is distancing herself from the mess, is urging Gov. Jerry Brown to appoint a trustee to manage the Board of Equalization.
State Controller Betty Yee, who by virtue of her office is the fifth board member, proposes to limit the board’s authority to preside over property tax appeals and a few other duties. Her proposal would strip it of virtually all other authority it has accreted over the decades, cutting its oversight of sales taxes, use taxes and more than 30 other revenue-generating programs.
“By taking those elements out of the Board of Equalization, the issue of the misuse of resources will no longer be an issue,” she told Ashton.
Brown and the Legislature would have no shortage of suggestions for how to restructure the board, if they chose to engage in the effort. Experts have been offering restructuring suggestions for decades. And not much has changed, certainly not for the better.