South Tahoe to ask voters to raise business license tax
By Dan Tirabasso
In a 4-0 decision Tuesday, the South Lake Tahoe City Council decided to give residents another opportunity to vote on a tax revision aimed at increasing revenue for the city. (Councilwoman Angela Swanson was absent.)
The June 5 ballot measure would increase the tax on the city’s largest companies by increasing the maximum business license tax from $3,448 to $20,000, while at the same time lowering the overall business license tax rate by 5 percent. It would mean a business would need gross revenues of $20 million to hit the $20,000 fee.
“… the business license tax will be decreased for approximately 99 percent of the businesses in the city, and increased for 1 percent of businesses,” the staff report says.
Finance Director Christine Vuletich on Feb. 7 told the council the tax increase could generate between $200,000 and $270,000 a year. The money would go into the city’s general fund, to be used as the city sees fit.
With the tax increase, it would mean just more than $1 million for the city coffers.
At the meeting, Vuletich said the $20,000 would be paid by three to five businesses, but not everyone agrees with that assessment.
According JoAnn Conner, president of the South Tahoe Chamber of Commerce, under this proposal five to 10 of the largest businesses will feel the pinch of this nearly 600 percent increase.
“We do communicate with these businesses, and we do know some of them are incurring increased costs because of new mandates from the feds and the state. So they’re experiencing higher costs and lower profit margins, in some cases,” Conner, who was at the meeting, told Lake Tahoe News. “So, we are concerned that if you implement new taxes and licensing fees at this point, some of those businesses will end up either downsizing more or cutting employee hours.”
But the majority of the council believes the tax increase makes things more equitable. Councilman Tom Davis is not in favor of raising taxes, but does agree the voters should decide.
Vuletich said overall about 47 of the approximately 3,000 businesses in South Lake Tahoe will see their business license fee go up if the measure passes.
Voters narrowly shot down a similar proposal, Measure E, on Nov. 2, 2010. It would have increased the maximum business license tax to $10,000, while reducing the overall business licensing tax rate by 10 percent.
Opponents of Measure E stated it was too tough on large businesses with low profit margins. They also said that by not eliminating the up to 3 percent annual increase that is tied to the Consumer Price Index, which is designed to keep pace with inflation, the 10 percent tax reduction would eventually be right back where it started, if not beyond.
The CPI adjustment would be eliminated under the new proposal.
This raises the concern that the already financially hobbled city may eventually have to endure a further reduction in revenue as inflation increases.
“It’s a concern, but not at this moment. We could always put it back on the ballot at a future time or just adjust the rates,” City Attorney Patrick Enright said.
If the measure passes with a simple majority, fees would go up July 1 – the annual date businesses must renew their licenses.
Current Rate Proposed Rate
Schedule A: $1.10 $1.05
Schedule B: $1.65 $1.57
Schedule C: $2.20 $2.09
Schedule D: $2.75 $2.61
Schedule E: $3.30 $3.14
This is per $1,000 of gross receipts.
Duh, how much is the business tax?
I was on the City business license task force and I know it very well. We businesses fought hard to keep a cap in place to give the small busineses and our few largew busineses owners and employees a fighting chance to make some kind of living here in Tahoe. I’m glad the South Tahoe Chamber spoke up about this. I hope they write the opposing argument on the ballot. I was very outspoken when this was put before the voters before. I called it a Trojan Horse, especially because the last measure had a CPI which would have raised it right back up after lowering the fee. But it still is deceptive. First let me say that the Council, manager and staff have worked hard to solve the budget issues that were created by others through unfunded state and federal mandates and unfunded medical costs for City employee retirees etc. They are good people trying to solve hard problems. That being said I greatly disagree with the overall philosophy they are proposing and the math of the issue. This is not abasic part of a sound business plan for the City or our few remaining businesses. The following are some of the reasons. President Lincoln was quoted to say” You cannot strengthen the weak by weakening the strong”. The political philosophy of punishing those who succeed is not consistent with the fairness it pretends to create. It is not an evil thing to make a profit and to employ others and to invest in a community. It is wrong in my mind to use the ballot box to take funds from one tax payer by promising the funds to another.The largest issue is that although the rate would be reduced for almost all the businesses the City would garner more taxes from almost half of the businesses. That is because they will be eliminating the cap which was set at about $3,500 and would now be at an astonishing $ 20,000! So even though the rate lowers eliminating the cap would actually cause about half, 47%,to pay more.That is the new Trojan Horse. The City says that they will profit up to $ 280,000. If only a few businesses hit the $ 20,000 as they claim then dozens more will be in the $3,500 up to $ 20,000 range. The average grocery store makes about a 1% to 2% profit. Raley’s for instance would need to sell 2 million dollars more worth of groceries to make that $20,000. The average gas station owner makes 5 cents ger gallon gross profit. They would have to sell 400,000 more gallons of gas to make the $20,000. I remember talking to a car dealer who told me that they made $500 to $1,000 per car sold and that a good month was 30 cars sold. The new tax would take an entire month worth of sales to make it up. That’s if that could be done in this down economy. In any case it will be the customers or the business employees who will pay.Prices will go up or employees will be laid off. For the City to be able to hire a couple more employees might mean a whole grocery store worth of employees losing their jobs. According to the Sac Bee, Raleys closed two stores recently. If we send the signal that they aren’t welcome will our town be next? The taxes in Nevada are already lower. It is realistic that just as they used to when the sales taxes were different that businesses and customers will move across the state line. More Cost Co stores will proliferate at the bottom of Spooner Summit or even just across the stateline. In my opinion, the City would do better to lower the fees to attract businesses to our dozens of empty buildings. That tide of new revenues would benefit all concerned much greater than the City raising taxes on the few that are just barely holding on.
Government raises taxes and fees because it CAN. It has no competition to undercut it.
I used to have a city business license. When they upped that fee a few years back, I moved my business out to the county. It costs less than half out there. Amazing.