The State Worker

It took almost 90 years, but lawmakers voted to gut California’s tax board

Scandals make case for tax board overhaul, Phil Ting says

Assembly Budget Chairman Phil Ting, D-San Francisco, favors an overhaul of a tax agency called the Board of Equalization. Its recent scandals, he says, make a case for a new approach.
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Assembly Budget Chairman Phil Ting, D-San Francisco, favors an overhaul of a tax agency called the Board of Equalization. Its recent scandals, he says, make a case for a new approach.

California lawmakers on Thursday voted to gut a unique and embattled state agency that both collects taxes and allows elected representatives to settle disputes from taxpayers.

The Legislature voted to strip the Board of Equalization of almost all of its power and to replace it with two new departments.

One of them, a new Department of Tax and Fee Administration, is expected to be up and running by July 1. It’ll take over the Board of Equalization’s responsibility to manage dozens of tax and fee programs, such as tobacco taxes, cannabis taxes and sales taxes.

The other department will take the Board of Equalization’s mandate as California’s tax court, where residents and businesses have appealed to elected representatives to settle their disputes with tax collectors. That work instead will go to administrative law judges who would be appointed from the state’s Office of Administrative Hearings.

Opponents of the overhaul most wanted to protect the Board of Equalization’s authority as a tax court, reflecting their belief that elected officials would be more responsive to taxpayers than civil servants.

“This is happening very quickly and I’m worried we are leaving taxpayers with even less than equivalent of a public defender,” said Sen. Cathleen Galgiani, D-Stockton, who voted against the bill.

Republican lawmakers who voted against the bill suggested they may somehow challenge the decision in the months ahead, citing a section in the state Constitution that bans the Legislature from creating or abolishing departments with urgency legislation.

“This is an agency that will be abolished and created in two weeks time. That makes absolutely no sense,” said Sen. Scott Wilk, R-Antelope Valley.

Good government commissions and the Legislative Analyst’s Office have been calling for the dissolution of the Board of Equalization since 1929. It was created in 1879 to ensure that county assessors fairly collected property taxes across the state.

Since then, it has grown to become one of three main tax-collecting agencies in state government and the only elected tax board in the country that hears disputes from taxpayers.

In recent years, news outlets including The Bee have revealed questionable donations that appeared to benefit elected members, campaign contributions that were bundled in a manner that disguised their volume and an expensive renovation of a board member’s office that cost taxpayers $130,000.

A damning audit in March showed that board members at inappropriately intervened in the agency’s daily operations, created a climate of fear among state workers who feared retaliation from elected officials and allowed faulty accounting that misallocated tax revenue.

“Right now the BOE members are doing some very strange things, so we can’t allow this to continue. We can’t allow them to interfere with the administration of the agency,” said Assemblyman Bill Quirk, D-Hayward.

State Controller Betty Yee announced the proposal to break apart the tax agency on Monday. It was endorsed by Gov. Jerry Brown, Assembly Speaker Anthony Rendon and Senate President Pro Tem Kevin de León. Their supporters viewed the proposal as long-overdue change at the tax agency.

Three of the board’s four members who are elected from geographic districts publicly campaigned against Yee’s proposal this week. The fourth, Democrat Fiona Ma of San Francisco, endorsed the proposal but also said she wanted lawmakers to have more time consider it.

Some of the Board of Equalization’s responsibilities, such as overseeing property tax collection, are detailed in the state Constitution and those programs will remain with it after the state opens its new revenue department.

But, about 90 percent of its 4,800 employees are expected to move to the new departments where they will continue do the jobs they hold today under different leadership.

“This is a much better system to deal with all the issues that have been raised,” said Assemblyman Phil Ting, D-San Francisco, who voted for the plan.

Adam Ashton: 916-321-1063, @Adam_Ashton. Sign up for state worker news alerts at sacbee.com/newsletters.

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