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After years of wrangling, debating, and negotiating with the business community, Palo Alto officials are expected to place a business-license tax ordinance on the November ballot tonight (Monday).
But even in the 11th hour, the proposed ordinance has undergone several revisions to reflect business concerns and City Council direction.
Last month, the council agreed to abandon the gross-receipts model advocated by staff in favor of an employee-count model that business owners said they found more palatable.
Now, staff is proposing to modify the business classifications to increase the gap between the various business categories.
The latest change — outlined in a staff report released last Thursday — raises the tax rate for professionals and lowers the rate for retailers and manufacturers. Professionals — a category that includes lawyers, doctors, dentists, accountants, architects and other businesses that require licenses — will now have to pay $95 per employee, a $7 hike from the $88 per employee rate staff previously proposed.
The tax rate for retail, wholesale and manufacturing businesses would be lowered from $40 per employee to $34.
Under the new proposal, the median professional and business-service provider would pay $239 a year, the median retailer would pay $129, while the median wholesale or manufacturing business would pay $190.
But the biggest winners in the latest recommendation are nonprofit businesses. The council previously expressed an interest in applying the tax to the city’s two employee-intense nonprofits: Stanford University Medical Center and the Palo Alto Medical Foundation. But legal research found nonprofit businesses to be exempt from such taxation, scrapping that plan.
Palo Alto plans to raise about $3 million in annual revenue from the new tax. The money will go to the general fund, which has been hit in the past year by plummeting tax revenues.
The new staff report acknowledges the bleak economic times and calls for the city to implement the new tax in phases. Collections wouldn’t begin until the first quarter of 2011 and the first payments would be 50 percent of the proposed tax rate.
“This delayed implementation will allow some time for the economy to improve,” the report from the city’s Administrative Services Department states.
The council meeting is scheduled for 7 p.m. at the council chambers in City Hall, 250 Hamilton Ave.
How does Facebook and other internet companies fit into this equation? Do they count as a manufacturing business since they aren’t a retail or licensed professional business?
It makes no sense to me that we are taxing businesses instead of letting fair trade generate it’s own revenue stream. I thought we wanted companies to stay in Palo Alto. I’m voting off every member of the Council that I can this time around. Wrong side of the police chief (non)controversy, ridiculous amount of attention on the Children’s Theater fiasco, leaf blowers, business tax. They aren’t my representatives.
well said “Makes No Sense”.
“How does Facebook and other internet companies fit into this equation?”
I presume since they are located on Stanford land they may not even pay taxes to PA.
I think the business tax levies far too much. I also object to the council’s placing this on the ballot pitting “the people” against “business.” The council should have the responsibility of taking input from the public and working out a sensible plan, but they do not do that often, do they?
“The council should have the responsibility of taking input from the public and working out a sensible plan”
Of course not. Elected officials often times punt to the ballot box to save them from having to make hard decisions and face the wrath of voters (or their, ahem, paying supporters). It’s the California Way.
I don’t get it. It says professional service companies have to pay $95 per employee. And it says the median professional service company will pay $239. Does the median professional service company have 2.5 employees?
Am I missing something?
I never doubted there would not be some sort of business tax on the ballot. They city council has been chewing on this bone far too long to ever give it up. However, I am pleased with the modifications. Now it is up to the general population of PA to vote one way or the other.
One more thing: Please, please, if the citizens vote against, drop it for good. No downtown street clean up, no BID. Nothing. Just listen to the people and drop it, if that is what is called for.
Tonight the Council will vote some $11l,000 for the Senior Games. Then we had the $250,000 for a useless webpage, not the mention $1 Million annually for the Children’s Theatre and that huge expensive mess.
Given these Council missteps and the way they waste money, it is hard to justify voting for a Business Tax.
To Makes no sense, I will also add the Plastic Bags Ban nonsense.
If we are going to do this insanity, let us use it to help the employed worker by encouraging full time employment.
Charge a higher fee per employee of record for businesses that use “Temporary” or part time (usually without benefits) employees, with an category exemption for enrolled school students and Christmas season help.
I just heard Poizner, Insurance commissioner of CA who just threw in his hat for the governorship of CA, on Armstrong and Getty radio. Wow. This guy impressed me. He says that we are driving out 3,000 taxpayers/WEEK from California from our burdensome taxes and regulation. He claims that we have doubled our CA govt in only 10 years ( my gosh!!). He is an engineer/MBA who actually understands numbers, finance and business, having not only been educated in such things, but also having begun businesses in CA and having lived first hand the problems we face.
I think we need to pay attention to him. And look south of us to Mountain View, who manages to attract a good tax base, and look in the mirror in our own city and see what has happened.
We have done to taxpayers in PA what CA has done to taxpayers in general. If it is true ( and I actually have read this elsewhere) that we will have lost 200,000 TAXPAYERS by the end of this year alone to friendlier States, can you imagine what this will do to the Californian State economy?
And, even more scarily, we are now doing the same political philosophy nationally. What was that saying? Think globally, act locally? Or was it more “all politics are local”?