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Oakland voters will probably have a chance to decide whether or not to overhaul the city’s outdated business tax, but not this year.
What began as an ambitious tax reform plan that would have been on the November 2020 ballot was amended last night by Oakland’s City Council and will appear instead on the November 2022 ballot. The legislation, co-authored by councilmembers Nikki Fortunato Bas, Dan Kalb, and Sheng Thao, looks very different from the initial version announced a few weeks ago. Besides waiting two extra years before putting the question to voters, the council also decided not to fix the progressive rate structure, but instead to allow a panel that includes business leaders to shape the rate structure. Most of the changes are the result of intense lobbying by business leaders and large companies that don’t want to pay higher taxes.
“This measure as written could very much dis-incentivize business investment at a time when investment is needed,” said Jackie Lynn Ray, a spokesperson for Clorox Company, during public comment at yesterday’s council meeting. Clorox is headquartered in Oakland.
Barbara Leslie, CEO of the Oakland Chamber of Commerce, whose members include large corporations like PG&E and Wells Fargo along with smaller companies, wrote in an op-ed that business leaders will likely support a progressive tax reform, but need more time to study the issue. She called the measure as it was previously written “punitive” and wrote that it could damage Oakland’s economy. At previous council meetings she said the councilmembers were rushing the issue at a time when the pandemic makes public participation in city meetings difficult.
Despite the two year delay and possibility that the final rates could be much lower than initially proposed, and other substantial changes, the tax reform measure’s main author said yesterday’s vote was progress. “It appears that we are in general agreement that our city’s business tax system needs to be updated and more equitably structured,” Councilmember Nikki Fortunato Bas said during the meeting.
The original version of the legislation would have slightly cut or kept tax rates the same for small businesses, while making larger companies pay significantly higher rates on gross earnings. As a progressive tax, it would raise millions in additional revenue for city services each year. Small businesses, those with less than $250,000 in annual income, would pay a flat $100 fee in lieu of the gross receipts taxes.
Although the council voted last night to submit some kind of progressive tax reform measure to voters on the November 2022 ballot, they removed specifics, leaving the details up to a blue ribbon commission. Councilmembers Loren Taylor, Larry Reid, and Noel Gallo supported the blue ribbon commission proposal as a means of giving business owners and other stakeholders an opportunity to shape the new tax rates before they’re incorporated into the ballot measure.
The blue ribbon commission will consist of nine members, including at least five business representatives. The council is scheduled to vote on July 21 to create the commission, which would begin meeting in January 2021.
Other notable changes to the business tax reform legislation included deletion of sections of the law that are needed to actually place the measure on the November 2022 ballot. It’s unclear if this means the council will have to vote again sometime in the next two years whether to bring the plan to public vote.
City employee unions strongly supported the original version of the legislation. Expecting it would appear on this year’s ballot, the union SEIU Local 1021 helped to establish a political action committee and a website to campaign for the measure. After last night’s vote, representatives of Lift Up Oakland, a coalition including the aforementioned union, IFPTE Local 21, and IAFF Local 55, and the nonprofits Oakland Rising, EBASE, and ACCE Action issued an upbeat statement.
“There is no question about the need to modernize the business tax; any concerns expressed have been about process,” the group wrote in an email. The group feels that the creation of a Blue Ribbon Commission puts to rest concerns that small businesses will not properly be taken care of during the Coronavirus pandemic.
“We will not give up on this issue and will push it to completion,” the group wrote. “It is vital to the future of our city and our communities.”