Oakland — To increase the city’s revenue by an estimated $40 million, some elected leaders are looking to reform Oakland’s business tax by giving smaller companies a break and earning more money from larger companies.
This would require eliminating the city’s flat tax rate on businesses’ gross receipts and switching to a progressive rate that increases as a company’s gross receipts increase.
“It’s inherently unequal,” Council President Nikki Fortunato Bass said of the current structure, “It’s really hard to see that small businesses are paying a disproportionate share of taxes.”
If the city council sticks to an earlier decision to put the proposal on this year’s ballot later this month and voters approve it, Oakland will join San Francisco and Richmond among the cities that have adopted more progressive, level-taxed taxes. approach is chosen.
Currently, Oakland businesses fall into one of 22 categories, each with its own rate structure based on total revenue during a calendar year. Rates range from 60 cents per $1,000 of gross receipts to $13.95 per $1,000 for all grocers for commercial and residential landlords. Some businesses also pay taxes based on the number of employees, permits or total payroll figures.
Fortunato Bas first introduced a tax switch in 2020. The Council set up a task force to analyze the potential consequences of the change and to obtain feedback from business owners and other special interests. Now, Fortunato Bas is rolling back the motion with District 3 Council member Carol Fife. He estimates that around 20,000 small businesses will receive a tax cut, and 97% of the city’s businesses will pay either the same or less while 3% will face a higher rate.
The 11-member task force presented its findings to the council in January. The Council’s Rules Committee will review the new proposal on March 31, before the full council considers it.
While the new proposed tax structure could generate a substantial amount of revenue for the city, it could result in the loss of an estimated 2,000 jobs if some of the hardest-hit businesses choose to leave, according to a report by the city’s director of finance, Erin Roseman. Is. ,
The Fortunato Bas and Fife proposal would also create a new tax for large companies with administrative headquarters in Oakland. They must pay $15 per $1,000 for the payroll of their Oakland employees, which could generate an additional $8.2 million for the city.
The proposal would also increase existing rates for large businesses in other categories that have between $75 million and $100 million in gross receipts — including auto sales, professional and business services, contractors, hotels, administrative and media companies. And it will create a new bracket for a variety of businesses that bring in more than $100 million a year.
Fortunato Bas says that by “inviting” large businesses to pay higher taxes, the city will be able to provide services that help them, such as road and sidewalk maintenance, garbage collection and assistance. The money will first go to the General Fund, which, however, will be spent at the discretion of the Council.
The Oakland Metropolitan Chamber of Commerce opposes the proposal. Its CEO, Barbara Leslie, says the switch would be too cumbersome for businesses and wouldn’t provide enough relief to smaller ones to justify the effort.
A city analysis presented in January showed that the average tax savings for many small businesses would be around $60 a year.
But for Ari Takata-Vazquez, a small-business owner who serves as executive director of the Oakland Indie Alliance and chairs the Equitable Business Tax Task Force, no “life-changing” amount of tax relief could be needed. does not make sense. For many small businesses, the increased urban services resulting from additional tax revenue is important.
“Taxes are rarely exciting to people, but people are excited to receive quality services,” said Takata-Vazquez. “We need resources.”
The Oakland Metropolitan Chamber of Commerce is part of a coalition of other chambers of commerce, business districts and businesses that have written a competitive ballot measure proposal that is also progressive but will not deepen businesses as the city proposes. Under that proposal, small businesses with less than $1 million in gross receipts in affected areas would pay only $60 in annual tax for the first three years.
Leslie said, although it would bring less money, “the council’s proposal, and the associated 2,300 direct jobs, is too dire to handle Oakland’s struggling ecosystem as business emerges from a two-year pandemic.”