On July 14, the Oakland City Council will consider a proposal for a major change in the Oakland Business Tax. According to the proposed rate schedule, businesses could see rate increases as high as approximately 300% – 500%.
Why should you care? Because you will pay for the increases. Unless a business shuts down, tax increases are always passed through to consumers.
Oakland is facing a $122 Million deficit and according to proponents of the measure, major new taxes are necessary to stave off insolvency. Years of mismanagement, major losses in litigation, and failure to live within its means have brought the city to this crisis.
But this tax proposal is not the answer. Businesses that are reeling from the Coronavirus Pandemic have laid off, furloughed, or cut the pay of thousands of workers. As they try to figure out how to continue in these horrific times, the city is dumping fuel on the fire that may cause far greater damage.
If the city miscalculates the ability of businesses to absorb large tax increases and that results in businesses shutting down or leaving Oakland, the city will not receive increased tax revenues. Worse, it will lose the money that is currently being paid. That will only increase the deficit and hasten the financial demise of the city.
Sadly, the City Council received very little support from city staff in understanding city revenue projections in our post-pandemic situation. When asked how much money the city could raise from businesses that are struggling through the pandemic, the city’s finance department expert said that he did not know. He was unable to make any projections on business receipts during and after the pandemic. This prompted two questions: Will Oakland businesses be able to survive at all, and, if so, will they be able to pay new absorbent taxes?
Businesses at risk include industrial companies that pay family-sustaining wages to workers who do not have advanced college degrees. A miscalculation on tax increases that drives these companies out of Oakland will also drive those jobs away.
There is also the question of whether Oakland can attract new businesses and jobs when it is creating major tax disincentives. Will developers be able to attract new companies when Oakland proposes unprecedented tax increases.
We have worked with District Two Councilmember Nikki Bas, one of the proposed ballot measure authors. We appreciate her willingness to listen to our concerns and her acknowledgment that our issues are real. She made some modifications to the tax proposal, but not nearly enough to eliminate our fear that the proposed tax will hurt business and the city much more than it will help.
If large businesses close or leave, they will take their jobs with them. Unfortunately, major tax increases make it highly unlikely that new businesses will come and bring replacement jobs with them. Certainly, they will not bring family-sustaining industrial jobs to Oakland.
District Three Councilmember Lynette Gipson McElhaney raised many concerns about the underlying assumptions and rationale for the tax increases and the effect they could have on the city and its residents. She was joined by numerous stakeholders who asked the authors to slow down so that the potential effects of the proposed measure could be thoroughly analyzed.
The Council subcommittee acknowledged shortcomings in the analysis and directed staff to rush through additional analysis. They know that additional amendments should be considered, still, they forged ahead to bring the matter to the full Council on July 14.
The stakes are very high. This tax proposal could be a major blow to Oakland. There are still a few days to fix this and arrive at a win for everyone. We urge every concerned citizen to tell the Council to consider all relevant factors and do not put a measure on the ballot that at best is half baked.
Again, why should you care? Because you will pay the price and suffer the consequences!