Recently uncovered problems at the State Board of Equalization (BOE), the agency that oversees sales taxes and hears tax appeals, are quite concerning and demand transparent and publically debated solutions. I have introduced legislation, Assembly Bill 1210, to fix the problems and increase transparency, while protecting taxpayers’ rights.
The problems are well-documented. An evaluation by the State Department of Finance revealed that the BOE misused revenue-generating employees, and did not correctly allocate sales tax revenue to various funds that receive state money.
My proposal, based on recommendations from the nonpartisan Legislative Analyst’s Office, includes reforms in three key areas.
First, it establishes a clear separation of powers. The BOE is a large agency overseen by five elected officials: the state controller and four members elected from regional districts. AB 1210 puts the agency’s executive director in charge of administrative functions, most personnel decisions, and day-to-day operations, so the five elected officials can focus on hearing tax appeals and establishing overall policies.
The legislation also increases transparency by requiring the executive director to report annually on each board member's use of staff and resources. This gives taxpayers more information about how their tax dollars are being spent.
Finally, my proposal ensures accountability by adding an “inspector general” to provide independent oversight, ensure proper management, and scrutinize implementation of needed reforms. It is important that the inspector general be time limited, work independent of the agency, and potentially be appointed by the Governor in consultation with the Legislature.
AB 1210 is the sensible approach for reforming the BOE, and it does not take the unnecessary step of abolishing the agency and wasting state resources to shift all of its responsibilities to other agencies with new buildings, new job titles, and new business cards with the same old problems. Nor does it make risky, untested changes to an agency that collects more than $60 billion per year in revenue to support vital public services.
Most importantly, the proposed reforms were crafted with the people in mind. When a small business owner is confused by complex sales tax laws and wants to make sure not to overcharge customers, the BOE should be there to help. When an individual has a disagreement over income taxes, the BOE should be there to hear the appeal, in a setting that doesn’t require an expensive attorney.
When the Legislature considers changes to the BOE, it is imperative to safeguard these important attributes of our tax system, and protect the entire Taxpayers’ Bill of Rights – the 1988 legislation authored by former Assemblymen Elihu Harris of Oakland and Richard Katz of the San Fernando Valley that also was passed to address problems at the tax agency. As the Los Angeles Times editorialized at the time, the Bill of Rights provides for “better communication between the state tax agencies and the taxpayer,” and assures taxpayers of “getting a square deal when facing state audits and enforcement actions.”
I look forward to working with the Governor and my colleagues in the Legislature to pass AB 1210, rather than rushing critical reforms through the State Budget process. Reform should be debated transparently in the public eye, through the legislative process, and with time for broad stakeholder input. AB 1210 advances reform of the Board of Equalization with the goal of getting the agency on the right track without undermining taxpayer protections.