San Jose Considers Impartial Review of Citywide Tax Measure

A citywide tax measure filed last week and angling for the 2016 ballot has already drawn opposition from the local business community. And while the city can do nothing to alter the initiative once it qualifies, some San Jose leaders want at least an impartial analysis of the proposal before November’s election.

In a memo submitted to Wednesday’s Rules and Open Government Committee, council members Don Rocha and Raul Peralez urge the city to examine how the measure would affect businesses and how it compares to the existing tax. The city attorney, they added, should review the language to see whether it raises any legal concerns.

The “Modernization of the Business Tax Ordinance,” which was filed by the same people who successfully campaigned to increase San Jose’s minimum wage in 2012, would swap the city’s per-employee tax with a gross-receipts tax on total business income. Proceeds would go to the city’s general fund.

Businesses would pay 60 cents, 90 cents or $1.20 per $1,000 in revenue, depending on the industry. Nonprofits, businesses under two years old and companies making less than $1 million a year would remain exempt.

Rocha and Peralez called for the third-party study last week after backers filed the initiative with the city clerk. Once the city attorney writes an impartial title and summary, proponents will have six months to gather the 20,000 signatures needed to qualify for the ballot.

San Jose State University sociologist Scott Myers-Lipton created the initiative with Kathleen Krenek, head of Next Door Solutions to Domestic Violence, and Steven Hunt, of social services nonprofit Stride Center. They say the measure would increase tax revenue by $30 million to $70 million a year for basic public services such as public safety, street repairs and libraries. San Jose’s existing business tax is based on number of employees but tops out at $25,000 a year.

Oakland and San Francisco have adopted similar gross-receipts business taxes, the former collecting $70 million a year and the latter $420 million.

“When undertaking a policy effort as complex and consequential as establishing a new business tax, it would be very desirable to conduct a full public process,” Rocha and Peralez wrote in their Rules memo. “Unfortunately, we will not have that opportunity in this case. … If this gross receipts tax proposal goes forward to the ballot, it will go forward as currently written, for better or worse.”

The two councilmen said it’s important that the study remain unbiased.

“We would ask our staff, particularly staff on the 17th floor, to keep in mind that they are not advocates for corporate interests,” Rocha and Peralez wrote. “They are servants of the public, and the public interest should be foremost in their minds.”

While it may have been ideal to have the tax reform brought by policymakers and submitted to rigorous public review, Peralez and Rocha acknowledged that they can see why the initiative’s backers chose to appeal directly to the voters instead of the City Council.

“There’s past experience,” they wrote. “The 2012 minimum wage measure was opposed by the Council, but approved by the voters with nearly a 20-point margin. There's also recent experience: just last month, the City Council declined to even study a commercial linkage fee based on the thinnest speculation as to what might happen if such a fee were eventually enacted. If the Council is unwilling to even study a fee on commercial development in the face of a housing crisis, why should anyone expect the Council to be a good faith partner on a gross receipts tax?”

More from San Jose's Rules and Open Government Committee agenda for January 20, 2016:

  • In response to a letter-writing campaign from residents of the Washington neighborhood in central San Jose, police will report on their efforts to combat prostitution and human trafficking. While residents asked for help with the problem, they also urged the city to connect sex workers with social services so they could possibly leave prostitution behind. “These neighbors have brought an important question to our attention,” according to a memo signed by Mayor Sam Liccardo, Vice Mayor Rose Herrera and council members Tam Nguyen, Raul Peralez and Don Rocha. “When adults and children are victims of sex trafficking, what is the role of enforcement?”
  • San Jose is moving forward with plans to build a Vietnamese community center. Council members Tam Nguyen and Manh Nguyen, who pitched the idea and pegged $200,000 in the current-year budget to get it going, want staff to return with a cost estimate by spring.

WHAT: Rules and Open Government Committee meets
WHEN: 2pm Wednesday
WHERE: City Hall, 200 E. Santa Clara St., San Jose
INFO: City Clerk, 408.535.1260

Jennifer Wadsworth is a staff writer for San Jose Inside and Metro Newspaper. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

7 Comments

  1. > While it may have been ideal to have the tax reform brought by policymakers and submitted to rigorous public review, Peralez and Rocha acknowledged that they can see why the initiative’s backers chose to appeal directly to the voters instead of the City Council.

    “Direct democracy”

    Ten wolves and a lamb voting on what’s for dinner.

    If the progressives lose, do we get to impose a “direct receipts tax” on them?

  2. Why is it that social engineers are always ready to jump on the tax bandwagon whenever there is some societal need that needs to be bumped up? We have seen countless examples of how inefficient govt operated projects and programs can be, Valley Med, VTA rail/bus, Water District, etc. Instead of just asking for more money how come these groups and agencies never look at more efficient models, the old tried and true “More bang for the Buck” trick.

    Of course one of the biggest cost savings would come with the elimination of the top heavy administrative hierarchies found in all these groups. But bureaucracy as an organizational form doesn’t work that way.

    • HB: Productivity is a four letter word to politicians, bureaucrats, and unionistas.

  3. – San Jose State University sociologist Scott Myers-Lipton created the initiative with Kathleen Krenek, head of Next Door Solutions to Domestic Violence, and Steven Hunt, of social services nonprofit Stride Center. They say the measure would increase tax revenue by $30 million to $70 million a year for basic public services such as public safety, street repairs and libraries. —

    It warms the heart to see the effort this civic-minded trio have invested in pursuit of funding for “public safety, street repairs, and libraries” — services that have next to nothing to do with their own fields. Oh sure, the more pessimistic among us might accuse them of using bait-and-switch tactics to lure voters with the promise of basic services when their real aim is more welfare bloat, but in this case I think trust is in order. Why, I’m not even going to let the fact that none of these people are in any way connected with running a business cause me to doubt their expertise on the impact of this radical change. If they say their plan can extract thirty to seventy million dollars out of San Jose’s business community without harming it, I’ll let nothing — not even common sense, cause me to doubt them.

  4. I see the same crowd that foretold the demise of the local economy when the minimum wage measure was up for a vote are back again. Well they were wrong then and are likely wrong about this measure as well.

  5. Taxes and fees go in only one direction, don’t they?

    “Don’t tax you, don’t tax me, tax that guy behind the tree.”

    These “raise the fees!” promoters are just looters who want what someone else earned. They are greedy thieves, always rooting around in someone’s wallet. Their tactic is to demonize a group, then punish that group with permanent fines.

    How about this: Kirk Vartan, the local busybody, is pushing this new confiscation. Since he thinks taxes should be raised, how about we start with his pizza restaurants. Lead by example, Kirk. Show us how much you care.

    I ask the council to just say “No.” Do the right thing for a change. Live within your budget.