Oakland’s corporate tax reform plans to gain support
OAKLAND — How Oakland taxes its businesses will change, but how isn’t yet clear because four proposals for doing so are competing for the November election ballot.
A proposal is being pushed by council members Nikki Fortunato Bas and Carroll Fife, who formally presented it at a council committee meeting on Thursday. It would eliminate the city’s flat tax rate on gross business receipts and move to a graduated, tiered rate that increases as a business’s gross receipts increase. The proposal would bring in $40 million more annually than what companies are currently paying, they say.
The other three proposals, also presented as progressive, were developed by labor and business groups. Because the November ballot will already be jam-packed with races and measures, the council urged the various groups to work together to come up with a compromise version.
“There are so many issues we’re asking voters to pay attention to, so we’re asking them to analyze four different measures of the same issue. I think it sends the wrong message,” council member Sheng Thao said at the meeting.
The effort to overhaul the business license tax began in 2020, when Fortunato Bas proposed giving small businesses a slight break and raising more money from larger ones.
Instead of sending its proposal directly to the ballot at the time, the council formed a task force to analyze the potential consequences of a change in the tax structure and obtain feedback from business owners and other special interests. . The task force came back with a recommendation for a graduated gross receipts tax in January that would increase the city’s annual revenue by $32.7 million.
Fortunato Bas and Fife then proposed a modified version of this proposal, which charges slightly different tariffs to various classes of business. They say that under their proposal, about 97% of businesses in the city would end up paying the same price as today or less, while 3% would face a higher rate.
A coalition of labor groups has developed a similar proposal, dubbed Our Oakland Initiative. This proposal would also provide a tax reduction for small businesses and increase the tax burden on those with gross receipts over $1 million.
Meanwhile, major business groups like the Oakland Metropolitan Chamber of Commerce have opposed the proposals, which they say will hurt businesses still reeling from the pandemic shutdowns.
“Our tax base is too small. We don’t have enough business to be taxed. The rate of increase needs to be reasonable, not drastic and desperate,” said Zack Wasserman of the Oakland Metropolitan Chamber of Commerce.
The House proposal, which it also calls progressive, would not tax large corporations as much. Small businesses with gross revenues of less than $1 million in certain industries would only pay $60 in annual taxes for the first three years. In total, his plan would raise taxes by about $15 million a year.
The Bay Area Council, a business-sponsored public policy organization, released a study that estimates the task force’s proposal would lead to even more job losses than the 2,000 predicted by city staff.
“The unintended consequences and ripple effects of this massive tax hike proposal would not only seriously hamper Oakland’s slow recovery from the pandemic, but jeopardize the city’s longer-term prospects for the growth of the city. economy, attracting jobs and securing new business and investment,” Jeff Bellisario, executive director of the Bay Area Council Economic Institute, said in a written statement attached to the study.
“It would also place an unhealthy reliance on big business for a larger share of city budget revenue that could disappear if employers flee to less expensive places,” he added.
But Sara Hinkley of the UC Berkeley Labor Center said Thursday there was no clear evidence that taxes or any other single factor motivates companies to locate somewhere or move. An accessible labor market, real estate costs, clientele, utilities, safety and cleanliness are also factors that go into business decisions.
She also noted that many businesses will be able to deduct the gross receipts tax from their state and federal income taxes.
Proponents of the more progressive tax proposals say it’s time for businesses to pay their fair share, and that the city’s increased revenue will help it pay for services that keep streets clean and safe and reduce noise. homelessness, blight and other issues that the business community often cites as problems.
The board committee is due to continue discussing the four tax proposals later this month. Although the full board will likely choose only one proposal to put on the ballot, other initiatives may also be eligible if the required number of signatures are collected.