Editorials

Legislators’ plan to gut a tax board seems solid. But here’s a cautionary note.

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.

For decades, one of California government’s worst kept secrets has been that the Board of Equalization, one of three state agencies that oversee various tax matters, long ago outlived its purpose.

Now, as part of a budget deal, the Legislature at last seems ready to right-size the board created by state constitutional amendment in 1879.

Many aspects of the bill have been debated over the years. But there will be little time to review the specifics of the latest proposal by the June 15 deadline for the Legislature to approve the budget, or the July 1 deadline for Brown to sign the new budget into law.

That should give legislators pause. The Democratic-controlled Legislature can approve the overhaul by a simple majority vote. Republicans had no role in shaping the bill. Both are unfortunate.

Still, board members have done little to help their institution. The four elected board members – the controller is the fifth member – generally are ex-legislators seeking $142,577 a year jobs that don’t require much work.

Often, they’ve found ways to skirt restrictions on the money they raise from corporate taxpayers litigating tax cases. The occasional member ends up charged with a felony.

So Californians should welcome the proposal by Controller Betty Yee, Gov. Jerry Brown and Democratic legislators to clip the board’s collective wings, limiting it to a few duties set forth in the Constitution – with a few caveats.

California is the only state with an elected tax board, The Sacramento Bee’s Adam Ashton reports. The Legislative Analyst says the board spends $27 million of its $670 million budget on constitutionally required programs, such as setting property taxes paid by PG&E and other utilities.

Government audits have been pivotal in informing the public about abuses. But press attention helped force the issue. Laura Mahoney of Bloomberg BNA has detailed how campaign donors tend to receive favorable treatment. The Sacramento Bee has reported how Board of Equalization member Jerome Horton was involved in the purchase of designer office furniture that cost $118,000 to buy and $12,000 to install.

Assemblyman Phil Ting, D-San Francisco, one of the overhaul’s architects, estimated the board would be left with about 400 employees. Roughly 4,000 other workers would be transferred to a new California Department of Tax and Fee Administration, and an Office of Tax Appeals, run by a director appointed by the governor.

Panels of tax attorneys would adjudicate tax disputes now decided by the elected Board of Equalization members. That’s seems like a fine idea. Too often, the temptation has proven to be too great for elected board members to side with taxpayers who have political clout.

In a brief press conference Monday to tout the bill, Ting noted that the Board of Equalization takes as long as two and a half years to decide taxpayer appeals. One reason to approve the bill would be to increase efficiency.

Yet Ting seemed unaware whether the bill included any provision requiring that the newly created office issue decisions within any set period. Nor does the bill contain a sunset provision requiring that lawmakers revisit it in a few years to see whether it’s working.

The proposal seems solid. The board has been a problem for decades. But caution is called for. The revisions are part of an ever-expanding practice of implementing sweeping policy as part of the budget, without full hearings. Legislative scrutiny tends to reveal problems. That can’t happen when bills are jammed through in mere days.

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