Proposed biz tax to be up to voters
Measure to appear on June ballot
As sales-tax revenue continues to wane in this recession, the Solana Beach City Council is proposing a tax on all area businesses to help balance its budget.
Residents will vote on whether to approve this multi-tiered business tax model on the June 2010 ballot. Solana Beach currently only requires businesses to pay $75 for a license upon opening, plus $16 per year for inspection. The new tax would range from as low as $50 for less lucrative businesses to as high as $1,150 for the most successful.
“This clearly isn’t perfect but it’s a heck of a lot better than what it was before,” said Councilman Thomas Campbell. “It speaks to the issue of equity and fairness. We can only do so much at this point in time.”
As home prices decline, consumers are less likely to spend on big-ticket items that generate income for a city. Further, when they do, they often will purchase from Internet outlets that are more affordable. This means no sales-tax revenue for the city of Solana Beach. The city’s sales tax is already down 22 percent, or $100,000, from last fiscal year at this time.
“The model has changed and we have to change with it,” said City Manager David Ott.
Under the new tax, a business can choose to either pay a flat fee based on annual earnings, or choose the assigned percentage that corresponds with its income. For instance, a company that makes between $100,000 and $999,999 can either pay a flat fee of $325, or choose to multiply their income by 0.00075. When income reaches roughly $433,000, it becomes cheaper to pay the flat $325. Less than that, it’s cheaper to do the math.
Peter House, president of the Highway 101 Village Walk Association, said many of his colleagues are not against the tax because its multi-tiered rates protect small businesses.
“The business community of Solana Beach is in tough times right now,” he said. “We wanted something simple and (the council) gave it to us.”
Solana Beach is one of only a few cities in California that does not currently levy this kind of tax to pay for city services. The idea was first brought up in a meeting last February, and it became more of a serious option in May when the fiscal crisis began to take its toll.
If passed next June, Ott said the first fiscal year would be prorated from August to approximately February. Businesses would pay the tax based on the money they earned during that shortened time period.
The city also released its first quarter financial report. With a quarter of the year passed, revenues are at roughly $1.2 million, or 9 percent of what they were projected to be. Ott said, however, that the city would receive a financial boost in December and January when property taxes come in.
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