A business tax structure that would tax big businesses more and smaller businesses less, introduced by two Oakland city councilmembers last week, may appear before voters as a ballot measure in the fall.
The current tax structure in Oakland is flat, which means all businesses pay the same rate, but this results in small businesses paying a greater share of all taxes paid, according to Council President Nikki Fortunato Bas and Carroll Fife.
The two council members introduced the progressive tax to make the tax structure in Oakland more equitable. The tax would raise about $40 million more than the current system and replace the 20-year-old regressive tax structure, Bas said.
“While thousands of Oaklanders struggle to make ends meet and our public services grapple for resources and to fill staff vacancies, the wealthiest corporations in our city continue to profit,” Bas said.
“Our proposal invites the largest corporations to make deeper investments to help rebuild and strengthen our city,” Bas said. “It will create a more fair tax structure, raising $40 million for homelessness services and housing, street and sidewalk maintenance, trash collection, small business assistance, fire safety, and community safety.”
The introduction of the legislation is an update to a resolution that went before the City Council on July 14, 2020. The legislation incorporates recommendations by the Equitable Business Tax Task Force and will go before the Rules and Legislation Committee on March 31.
The combined revenue of small businesses, which are defined as those making less than $1 million in gross receipts yearly, is just 18 percent of citywide taxable gross receipts. But small businesses pay 34 percent of all business taxes.
Large businesses earn the balance or 82 percent of all taxable receipts and pay just 66 percent of business taxes.
Ninety-three percent of all businesses in Oakland earn less than $1 million in gross receipts, Bas’s office said.
The $40 million more in tax revenue may help provide Oakland residents with better living conditions, which they want, Bas and Fife say.
“The calls for city service improvements are universal, regardless of race, class, and income — but when it comes to equitable tax responsibility, universality ends,” Fife said.
“The flat tax structure in place today is outdated and requires more from women, BIPOC and small businesses operators who shoulder the weight of this financial inequity while big businesses avoid accountability to our community,” Fife said. “Local legislators have a responsibility to make it fair.”
Tax cut for small businesses
Under the councilmembers’ legislation, about 20,000 small businesses would get a tax cut.
That would include manufacturers making up to $1 million in gross receipts and retailers, restaurants, grocers, wholesalers, business and personal service firms, hotels, motels and professional/semi-professional businesses making up to $2.5 million in gross receipts.
Only about 3 percent of current Oakland businesses would pay more in taxes under Bas and Fife’s proposal. Ninety-seven percent of Oakland businesses would pay less or about the same as they do now, according to Bas’s office.
The councilmembers’ legislation also requires businesses to pay a higher tax rate as they earn more.
A coalition of small businesses, labor unions and community organizations announced their support for the Bas and Fife proposal. The Invest in Our Oakland Coalition said the proposal aligns with one the coalition is circulating.
“Oakland residents have been asked to bear the burden of increasing taxes each year while big businesses have failed to pay their fair share,” said Kate O’Hara of East Bay Action, a member of the coalition. “Oakland residents deserve fully funded essential city services we all rely on.”