RICHMOND — City leaders will ask voters to approve changes in the way businesses are taxed, in an effort to boost city revenue.
The City Council on Wednesday voted to put a measure on the November ballot asking voters to allow the city to tax businesses based on their gross receipts instead of the number of employees.
Currently, businesses pay a flat annual license tax of $234.10 plus $46.80 per employee up to 25 employees and $40.10 for each additional employee. That would change if voters in November approve the proposed tax structure, under which businesses would have to pay a percentage of their gross receipts earned in Richmond, with the amount depending on the nature of their business and at a rate assigned per industry.
In the proposed model, most businesses would pay between .06% and and .68%. Grocers, for example, would pay .06% if they make up to $1 million in sales for the year, .1% if they make between $1 million and $2.5 million, and tiered up to .2% if they have gross receipts of $50 million or more annually in the city. A few industries would exceed the typical rate structure, including firearms ammunitions, which would be taxed at a rate of 2.4%, and cannabis, which would continue to be taxed at a rate of 5%.
The rate structure would bring in an estimated $6.2 million in total revenue — $3.2 in new revenue over the current structure.
While city staff had recommended taxing residential rental gross receipts at a flat rate of 1% with a 50% discount for rent control properties, Councilmember Melvin Willis proposed using Berkeley’s model of taxing rentals at rates of 1.081% for the first four units an owner has and 2.88% for the fifth or more. He also proposed giving property owners with four or fewer units a chance to credit the fees they pay to the rent board to the tax — thus not requiring them to pay both the full rent board fees and the business tax.
A majority of the council approved his motion, with Councilmember Demnlus Johnson abstaining and Mayor Tom Butt and Vice Mayor Nat Bates voting no.
Bates said he believes changing the tax structure will unfairly burden businesses, especially at a time when many are barely hanging on in the ongoing economic fallout of the pandemic.
“You’re sticking it to the people who are already hurting and they’re going to hurt even more,” he said, noting that businesses like Amazon, which city staff and leaders worked hard to bring into town, could be driven out by this tax.
The measure has drawn support from workers and union members, who say the change would stimulate job creation because additional employees wouldn’t become a tax burden.
The progressive tax structure proposed, advocates say, would put more of the burden on large businesses making more revenue, rather than keeping a flat rate across all businesses.
the money generated by the tax rate change could go toward the city’s funding of “Richmond youth, libraries, parks, community centers, emergency response, and other city services that may see cuts due to a structural budget deficit compounded by COVID-19 related revenue shortfalls,” a city memo says. Because the money is considered a general tax, however, it could be spent other ways too. The measure would need a simple majority of votes to pass.
While the city has to submit by Friday the ballot measure to be placed on the ballot, it is allowed to make small changes such as lowering the tax rates (but not raising them) in the future. Thus, councilmembers agreed to form a working group to bring in voices from the business community and others to discuss what the rates for specific industries should be.
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Author: Annie Sciacca