The Tax Collectors' Conscience

Forget the new Indiana Jones thriller, for real action-packed excitement just tune into the State Senate Revenue and Taxation Committee. Last week's hearing had it all: a tax temper tantrum, rowdy debate over parliamentary procedure and even controversial remarks about the tax agency's conscience.

The most incendiary comments came from Senator Mike Machado.

"I had held them in much higher esteem," referring to the State Board of Equalization. "For all of the sudden the Board of Equalization to have a sense of conscience, a selective sense of conscience, I really find that unique for tax collectors."

As the elected taxpayer advocate for more than 8.5 million Southern California taxpayers, I take great offense to the Senator's comments. The Board of Equalization, the state's tax collectors, should have a sense of conscience. Actually, the California Taxpayer Bill of Rights mandates that we have one.

It begs the question just how the Senator wants the tax agency to operate. Just a few months ago, I launched an internal investigation which revealed that the BOE had wrongly withheld $42 million in tax refund checks from 5,500 small businesses. In some instances, the checks had been illegally held for almost four years. In response to the investigation, the Board immediately and unanimously took action to return the money and correct the problem. That's Republicans and Democrats working together to help do the right thing for taxpayers.

In the Senator's view, maybe a "conscience-less" tax agency should have held the money indefinitely. It certainly would have generated more revenue for the state.

However, the most troubling part of last week's hearing isn't the controversial comments, but the defeat of a bill that would have generated revenue for the state. Assembly Bill 1901, a bill I sponsored with the unanimous support of my BOE colleagues, would have encouraged more taxpayers to electronically file their taxes.

Current law discourages e-filing by applying greater penalties for late e-filers than traditional filers. An e-filer who is one day late must pay a full-month's interest penalty. If the same taxpayer used the traditional snail mail, he could avoid interest penalties altogether.

E-filing generates more revenue for the state because payments are transferred instantaneously; thereby, allowing the state to immediately collect daily interest revenue. Conversely, traditional snail mail can take up to 2-3 weeks for the state to process payment. During that time, the state is losing valuable interest. Traditional tax payments also take longer and are more costly to process than e-filed returns.

Assembly Bill 1901 (Silva) would have changed the law to allow e-filers, who are a day late, to pay just one day's interest. The bill unanimously passed the State Assembly on April 21st. Unfortunately, the committee killed the bill.

Even when Republicans and Democrats at the tax agency unite on a bill to help taxpayers and the state, that's no guarantee the Legislature will approve it. Let it be a lesson to taxpayers: don't e-file. Drop your tax returns in sloppily written envelopes. You will have more rights than if you helped the state and e-filed your returns.