For weeks now I have been delving into the new Commission on the 21st Century Economy report on taxes. I have praised its recommendations to reduce and eliminate taxes, and I have encouraged legislators to study the research into the many problems with the current tax structure. Now I need to move on to the worst part of the report: the recommendation to abolish the Board of Equalization. Without hearing from any Board member (including me), they concluded that our appeals process for taxpayers is unfair. While I do not always vote with the majority on the Board, I do know that of all tax appeal systems this is the fairest.
Members of the Board of Equalization are elected by the people. Voters still trust their own vote more than they trust the political appointment process. Judges or hearing officers who are appointed by a Governor or some department head are much more likely to answer to the one who gave them the job than to the people of the state. It is true that the BOE also administers the collection of sales taxes and dozens of other taxes, but our appeals process is independent of our auditors. The department must present its own case to the Board on every contested tax matter.
The other controversy which the Commission bought into without adequate knowledge is the campaign by lawyers to take over the tax appeal system. Right now taxpayers can represent themselves before our Board or can hire a representative to present their case. There is no requirement that any representative be an attorney. Members of the California State Bar (a.k.a. the labor union for lawyers) do not like this. I think they do not like losing the business to non-lawyers. The truth is that lawyers are expensive and often do not know enough about the tax situation of their client. A CPA or even a bookkeeper who knows the business inside-and-out can often present a better understanding of why the taxpayer did what they did and what advice they relied on than can an attorney.
Actually, no taxpayer is required to appeal to the BOE to decide a tax matter; they can also challenge the tax in Superior Court. Unfortunately for the taxpayer, current state law requires taxpayers to pay the entire tax, penalty and interest that is in dispute before a trial can begin, and they have to hire a lawyer. That is an unfair system.
In fact, the entire recommendation of the Commission is to compound the unfairness with a new system biased against the taxpayer. These are honest tax disputes and they differ from criminal tax evaders who are given justice in the criminal court system. The BOE appeals process is something available to any and every taxpayer who disagrees with their government, and the Commission is wrong to set that aside for the sake of a bunch of lawyers.