Capitol Alert

California tax board squabbles over chairmanship

The state Board of Equalization collects a variety of taxes, including those on cigarettes, which must legally have the tax stamps shown on these packs. Battling black market sales of untaxed cigarettes is one of the board’s most important duties.
The state Board of Equalization collects a variety of taxes, including those on cigarettes, which must legally have the tax stamps shown on these packs. Battling black market sales of untaxed cigarettes is one of the board’s most important duties. Sacramento Bee Staff Photo

Long-simmering conflicts among the four elected members of the state Board of Equalization – all former state legislators – erupted in public Wednesday night.

At the end of a two-day meeting in Culver City, a verbal skirmish over election of a new chair and other issues ended with Democrat Fiona Ma succeeding Democrat Jerome Horton as chair, but then adoption of a new policy that would limit her to a single year in the chair.

The five-member board, four directly elected members plus the state controller, collects taxes on sales, gasoline, cigarettes and other commodities and resolves conflicts over the taxes it collects, as well as income tax case appeals from the Franchise Tax Board. Earlier in the meeting, for example, it had voted to settle an income tax dispute involving actor Rob Lowe.

It’s time to allow other members an opportunity to chair the board.

Jerome Horton, member of the Board of Equalization

As the meeting began on Tuesday, Horton, chairman for the past five years, had issued a press release saying, “It’s time to allow other members an opportunity to chair the board.”

The announcement was surprising because Horton had previously indicated he wanted to remain in the chair, and apparently reflected his acceptance that Ma had the votes to replace him.

Nevertheless, Horton nominated Republican Diane Harkey to succeed him, but his motion gained support only from Harkey and himself, while Ma, Republican George Runner and Yvette Stowers, the surrogate for Controller Betty Yee, opposed it.

The same 3-2 lineup later elected Ma, but the Horton-Harkey faction gained Runner’s support for a new policy saying the chairmanship would rotate each year after Ma had served her term – albeit with another squabble over how the rotation would proceed.

Automatically rotating the chairmanship has occasionally been the board’s policy in the past, but on other occasions it has simply elected a chair annually, which is how Horton lasted so long.

The board’s chair not only controls its agenda, but sits on the three-member Franchise Tax Board, which collects personal and corporate income taxes and handles disputed tax cases.

This is not in the best interests of the board.

Diane Harkey, tax board member, on a measure tightening conflict of interest rules

In the midst of the votes, Harkey lashed out at Ma for sponsoring a bill that would tighten the conflict of interest laws affecting the board. Assembly Bill 1828, introduced by Assemblyman Bill Dodd, D-Napa, would, among other things, disqualify board members from voting on any tax issue involving a campaign contributor.

The bill “puts everybody (on the board) in the ditch,” Harkey told Ma, adding, “This is not in the best interests of the board.”

Ma refused to engage with Harkey, saying only, “We all bring different perspectives to the board.”

The board’s internal conflict may reflect rivalries over ambitions for other office. While little known to the general public, the board has been a steppingstone to higher office.

Yee, now state controller, was Ma’s predecessor on the board, for example. John Chiang, now state treasurer and a possible candidate for governor in 2018, was Yee’s predecessor as controller and before that a member of the board. Horton was appointed to the board in 2009 to succeed Judy Chu, who had been elected to Congress.

Ma, a former San Francisco assemblywoman, is believed to be positioning herself to run for either controller or treasurer when those offices open.

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