Infamous Business License Cap Might Be Lifted
Tuesday night the Finance Committee sent a recommendation to the city council to allow Emeryville voters to decide if the much maligned business license tax cap should finally be rescinded. The meeting, held at City Hall and well attended by business owners and residents alike, was also intended to decide about whether the actual business tax rate should be increased as well as a possible tax exemption for small businesses. The committee decided to pass to the council, all three recommendations for their judgement. If the council OKs the recommendations, probably at a May meeting, then the residents will have the final say in the form of a November ballot initiative.
At issue is primarily the lifting of the tax cap; long a point of contention for small business owners and residents alike. The current law places a cap or upper taxable limit on all business income at $117,000. Any income over that amount is tax free. Emeryville stands alone in the entire Bay Area with its tax cap law as no other cities have any cap on taxable business income.
The law effectively makes small businesses pay much more than large businesses.
The city council majority has long defended the cap stating Emeryville is such an undesirable place for businesses to locate that the city needs to create extremely generous tax incentives to attract the largest businesses here. It is noteworthy however that economic conditions are such that those council members, formerly defenders of the tax cap, are now entertaining the idea of lifting it.
As the law is currently written, even for business income below the cap, Emeryville's taxation is far lower than its neighbors at .08% of gross receipts. Oakland's rate is .12% while Berkeley sets their rate at .18%. Neither of the two neighbors places a cap on taxable business income.
The committee said the council will decide if the voters will be able to set a higher rate as well as lifting the cap, possibly in two separate ballot initiatives.
The staff recommended the committee reject a proposal to waive tax fees for businesses with less than $100,000 gross receipts. City finance chief Karen Reid claimed no other cities in the Bay Area past or present waive fees for small business; however Emeryville itself waived the business license tax for small business as late as 1999. That law, extant for 12 years, was overturned by the council after its author, former council member Greg Harper left office in 1999.