OAKLAND — Instead of putting multiple competing proposals on the November ballot to overhaul the way Oakland taxes businesses, the political, labor and business backers of several proposed efforts are joining together to put one measure in front of voters.
The new proposed measure — which the City Council on Thursday will consider asking voters to approve — would eliminate the current flat tax rate structure on businesses’ gross receipts and switch to a progressive, tiered rate that increases as a company’s gross receipts grow. If approved, it’s expected to generate $22 million annually for the city’s general fund, which proponents say could be used toward services such as reducing homelessness and cleaning up city streets.
Council President Nikki Fortunato Bas, who has spearheaded the effort to update the city’s business license tax over several years, said the goal is to “make the system more equitable and fair.”
Under the current tax structure, a business with $10 million in revenue is taxed at the same rate as a business with $100,000 in revenue, although the rate varies by industry. The new proposal calls for the rate to increase based on a business’ gross receipts, with rates that still would vary by industry.
About 6,000 businesses — including grocery, restaurants and others — would see tax relief under the new plan. But some of the highest-grossing businesses in Oakland — mostly companies with administrative headquarters that have more than $20 million in annual revenue — would pay up to four times more than they pay now, Fortunato Bas said Monday.
About 67% of the businesses that would be affected (cannabis and real estate businesses are excluded from the measure because their tax rates were updated in 2019) would have no change in their business taxes, while about 23% would see a tax reduction averaging $110 per business. About 10% of the affected businesses would see taxes increase an average of $9,719 per business, according to a report by Fortunato Bas, Fife and two other council members who are sponsoring the proposal: Sheng Thao and Dan Kalb.
Fortunato Bas first brought a proposal to change the business license tax in 2020, but instead of sending her proposal straight to the ballot then, the council formed a task force to analyze the potential consequences of a tax structure change and get feedback from business owners and other special interests. The task force returned with a recommendation for a progressive gross receipts tax in January that would boost the city’s annual revenue by $32.7 million.
Fortunato Bas and fellow council member Carroll Fife then came up with a modified version of that proposal, one that charges slightly different rates to various categories of businesses and would have resulted in about 97% of the city’s businesses paying either the same as now or less, while 3% would face a higher rate, they said. It would have brought in $40 million extra per year.
Meanwhile, a coalition of labor groups had developed a similar proposal, called Our Oakland Initiative, which also would have given a tax cut to smaller businesses and increased the tax burden on those with more than $1 million in gross receipts.
But business groups like the Oakland Metropolitan Chamber of Commerce opposed the proposals, arguing they would hurt businesses still reeling from pandemic lockdowns and prompt more companies to flee the city or avoid setting up shop in Oakland. They offered their own measure, which also called for a “progressive” structure but offered more tax relief for businesses and would have brought in significantly less revenue for the city.
After the City Council earlier this year urged all the groups to work together to avoid competing ballot measures that would confuse Oakland voters, they apparently did just that, vowing Monday in a joint press conference that they had come together to compromise and will send just one proposal to the voters, should the City Council approve it at its meeting Thursday.
Multiple council members, labor leaders and business officials spoke Monday, touting the “uniqueness” of the various interests agreeing on a tax issue in a city as politically feisty as Oakland.
“This is a new day,” Fife said at the press conference, cracking a joke about going to the podium alongside one of the leaders of the Chamber of Commerce who is not usually allied with the progressive council member. She called the effort a “win win.”
Chamber of Commerce leaders said they are pleased with the new iteration of the measure, which will bring much less revenue to the city than the earlier labor-backed proposals that the chamber had campaigned against. Zack Wasserman, chair of the Oakland Metropolitan Chamber of Commerce, praised the effort, noting that the new proposal “ensures progressively higher taxes” to fund “services that will create a safer and more vibrant city.”
The money will go to the general fund, meaning it is not earmarked for a particular purpose, but the council members say they want to use the funds to help staff the city and increase services that would help businesses and residents.
“Our priorities for Oakland are clear: support small businesses, fix our streets, clean up trash, address the homelessness crisis, and ensure fire and community safety,” they wrote in the memo to their fellow council members.
The proposal, if approved by the City Council this week, will then go on the November ballot, where it needs a simple majority of voters to be implemented in January 2023.
