In September, two Inland Empire small business owners exposed sloppy work by a state auditor during two tax appeals that were heard before the state Board of Equalization. In doing so, the business owners scored unlikely victories against powerful state government.
As an elected member of the board who heard the case, my job isn’t to protect the state from itself. My job is to provide agency oversight and apply tax laws fairly and equally. If the state is at fault, taxpayers shouldn’t be on the hook. It’s that simple.
The improbable victories, however, raise an important question: Will ordinary taxpayers stand a chance against the new and powerful Office of Tax Appeals beginning January 1?
In the first case, a state auditor lost sensitive taxpayer information, causing the taxpayer to go through the tedious work of changing all her accounts since her driver’s license, social security number, bank account numbers and other sensitive information were included in the missing paperwork.
The state never found her records, but that didn’t stop auditors from “guesstimating” she owed more taxes.
In the other case, the auditor visited an Upland restaurant owner. The auditor made careless errors and used unfounded assumptions to justify a much higher tax bill than was warranted.
After hearing testimony, Democrats and Republicans voted in favor of the two taxpayers, relieving them of thousands of dollars in taxes, penalties and interest the state claimed they owed. After a long and lengthy appeals process, the two taxpayers prevailed, and in the process, helped expose some serious problems.
With these cases in mind, we all should be aware not every taxpayer has resources to fight the state, even when it’s clearly wrong. As matter of fact, the two businesses owners represented themselves before the board without attorneys. It’s easy to see why many worry the deck is stacked against the little guy. After all, the state has a horde of auditors, collectors and lawyers on payroll — all at taxpayer expense.
When taxpayers prevail, it gives hope. It signals that maybe, just maybe, there are checks and balances that correct injustice. But, why didn’t supervisors and managers catch these problems during the appeals process? And what will happen next year when state workers, rather than elected officials, start hearing tax appeals?
Earlier this month, the Legislature and governor hurriedly enacted faulty legislation creating positions for state employees who will be paid annual salaries of up to $143K to hear tax appeals. It’s an open question whether these new panels will be fair to taxpayers.
Concerns are already growing that there could be conflicts of interest.
In fact, nothing in the new law prevents the state from filling positions with its own tax agency attorneys.
My Democratic colleague Fiona Ma is so concerned about this possibility that she sent a letter to the governor warning: “If we were to allow these same biased attorneys to serve as Administrative Law Judges on this new panel, I believe we would be doing a grave injustice to taxpayers and be setting the reform effort up for failure.”
She’s right. It would be incredibly naïve to think unelected bureaucrats won’t be pressured into ruling against taxpayers to protect state coffers. If that were to happen — and it will — it would add additional stigma to an already misguided reform effort that stripped taxpayers of their rights.