Lawmakers Introduce Constitutional Amendment to Abolish Board of Equalization
Proposed amendment is latest attempt to eliminate the 144-year-old tax board with a history of scandal.
California assembly members introduced a constitutional amendment to abolish the California State Board of Equalization (BOE), the state tax agency responsible for property, alcoholic beverage, and insurance taxes. The amendment, ACA 11, would abolish the BOE as of January 1, 2026 and require the legislature to create either a single state tax agency or multiple tax agencies to replace it. As a constitutional amendment, the bill requires a two-thirds vote to pass. It would then be on the statewide ballot in November 2024.
The BOE was stripped of most of its powers and duties in 2017 amid controversies and scandals. Proponents of abolishing the BOE argue that other tax agencies can perform its remaining tax functions. Opponents, however, argue that the state needs property tax administration that is directly accountable to voters.
Constitutional Responsibilities
The BOE was established under the California Constitution of 1879 as the agency responsible for ensuring that county property tax assessment practices were equal and uniform throughout the state. The legislature expanded its role to include the administration of most California taxes other than income taxes, amounting to the collection of about 30% of state revenue. This included more than 30 taxes and fees and, including sales and use taxes and property taxes. The BOE also became responsible for auditing taxpayers and hearing tax appeals. The five-member board, which is composed of four members elected by regional districts and the state controller, is unique as the only tax board in the United States under which elected officials administer tax programs and adjudicate tax appeals.
Controversies
In March 2017, the California Department of Finance published a report on the BOE’s misuse of public funds, leading Governor Jerry Brown to request the California Department of Justice to investigate the agency. The audits and investigations found that the board failed to report tax information accurately, elected board members were misusing staff and public funds for political purposes, members were subject to undue influence of BOE and political interference, and there were conflicts of interest among BOE members.
In response, Governor Jerry Brown signed into law AB 102, known as the Taxpayer Transparency and Fairness Act of 2017, which reduced the BOE’s responsibilities to its constitutional duties of administering property taxes, alcohol excise taxes, and taxes on insurers. The law also established the California Department of Tax and Fee Administration (CDTFA), which became responsible for administering the taxes that are not mentioned in the state constitution, including sales and use, fuel, and cigarette taxes. The CDTFA later became the auditor of all state taxpayers. The law also established the Office of Tax Appeals (OTA), which adjudicates state income and franchise tax appeals from the Franchise Tax Board (FTB) as well as sales and use taxes appeals from the CDTFA.
Brown was not the first governor to call for changes to the tax board, however. In 1928, some tax duties were transferred from the BOE to the agency that later became the modern-day California Franchise Tax Board in response to calls to overhaul or dissolve the board. In 1949, the Legislative Analyst’s Office criticized the board for poor revenue management and the lack of uniform policy. More recently, the BOE was the target of unsuccessful change efforts during the 1990s, when Gov. Pete Wilson proposed to merge the state’s two tax boards and, and during the 2000s, when Gov. Arnold Schwarzenegger proposed changes the state tax system.