I was asked to provide some ideas for Republican legislators for tax reform bills.  Below is a list of ideas for a fairer tax system and enhanced justice for taxpayers.   The first items are what I like from the Commission on the 21st Century Economy’s recommendations.

ELIMINATE THE SALES AND USE TAX – COMMISSION RECOMMENDATION

I support the Commission’s proposal to eliminate the state’s portion of the Sales and Use Tax.  The Sales and Use Tax made sense when the vast majority of the economy consisted of tangible items.  The economy has been transformed so much the Sales and Use Tax no longer effectively captures consumption.  With economic growth occurring in services and electronic communications, the Sales and Use Tax is now merely a tax on a declining universe of businesses and it is exacerbating their decline.  Additionally I support eliminating the local portion of the tax as well.

LOWER THE PERSONAL INCOME TAX FOR EVERYONE- COMMISSION RECOMMENDATION

Standard deduction of $45,000 for joint filers ($22,500 single filers).
Itemized deductions limited to mortgage interest, property taxes and charitable contributions.
Tax rate of 2.75 percent for taxable income up to $56,000 for joint filers ($28,000 single filers) and 6.50 percent for taxable incomes above that amount.

ELIMINATE CORPORATION TAX AND THE MINIMUM FRANCHISE TAX- COMMISSION RECOMMENDATION

The state should eliminate the Corporation Tax, which is currently at 8.84 percent. It should also eliminate the $800 minimum franchise tax.

BROADEN THE BOE’S AUTHORITY TO WAIVE INTEREST WHEN TAXPAYER NOT AT FAULT

Under current law interest accrues on tax liabilities except when there is ministerial or management errors on the part of the Franchise Tax Board or Board of Equalization.  This is almost impossible for a taxpayer to prove and is thus meaningless.  Unfortunately, many taxpayers come forward who want to pay but have difficulty ascertaining their liability.  It sometimes takes the FTB or BoE more than a year to respond to a taxpayer’s request for clarity, during which interest is accruing on their tax liability.   The Board needs authority under the law to waive interest when the lateness of payment is not due to taxpayer malfeasance, but to bureaucratic unresponsiveness.

INTEREST RATE FAIRNESS

There is a 6-8 percent difference in the interest rate depending on whether you owe the government, or the government owes you.  Not surprisingly, the government charges a lot more interest when the taxpayer has a liability, but when there is a credit, the state pays a lot less.  The rate should be the same. 

TAXPAYERS SHOULD BE INNOCENT UNTIL PROVEN GUILTY

If you are accused of a crime in court, the burden of proof of your guilt is with the government. It should be the same at our tax departments.

TAXPAYER PRIVACY

The tax programs administered by the BoE (Sales and Use, fees etc.) should conform to the state’s income tax laws so that all refunds to taxpayers are private.

PLACE PRO-TAXPAYER EVIDENCE STANDARD IN LAW

To prove fraud, the Board of Equalization abides by a court decision that requires fraud evidence against a taxpayer to be "clear and convincing". Yet accused criminals enjoy protection "beyond a reasonable doubt". Taxpayers should have at least the same rights as criminals.

HOLD TAX COLLECTORS ACCOUNTABLE

Tax department employees have broad immunity that shields them if they abuse taxpayers or violate their rights. Tax employees should not have greater immunity than public safety employees.

TAXPAYERS SHOULD HAVE PUBLIC DEFENDERS

Taxpayers coming before the Board of Equalization should have the same access to public defenders that accused criminals have in court.

CONSOLIDATE TAX DEPARTMENTS

The state’s myriad tax departments should be merged into one to save money and to make it easier to comply with tax laws. It should be run by an elected Tax Commission whose members are accountable to the people by how they honor taxpayer rights and administer justice.