That’s the sentiment of some residents – maybe you -- about the proposed new business tax for Palo Alto, to be voted on in the November election.
Are you sure you won’t be paying more? Well, you’re wrong.
Why? Because once businesses get their new tax bills, some in the five-and-six-digit range, they will inevitably pass on these extra costs to consumers – us. They will raise the prices of their goods and services because if they don’t, they will lose money – and may be forced to close down or move out of Palo Alto.
I came across a report from the city council’s Finance Committee of probable tax amounts that will be levied on businesses, if this measure is approved by voters. While the amounts are still fluid, depending on whether the city charges a 10- or 12-cents per-square-foot fee, the proposed tax would make the first 5,000 square feet of every business largely exempt, subject only to a $50 annual fee. But businesses with more than 5,000 square-feet would be a different animal, subject to a major year-after-year payout.
And how much will that tax cost various businesses? A projected $165,600 levy for Nieman Marcus and a tax of $313,920 tax charge for Macy’s -- both in the Stanford Shopping Center, which is in Palo Alto. Macy’s has shuttered several of its stores around the country in recent years.
While start-up groceries would be exempted, established ones currently are on the taxable list. Estimated yearly taxes: Country Sun, $7,200; Grocery Outlet, $15,624; Whole Foods, $17,971; Safeway, $33,574; the Market at Edgewood, $30,672, and Mollie Stones, $88,645.
Need I mention that grocery prices around the country have escalated the past two months, which is causing a lot of consumer concern and grocery owners a great deal of angst, since the profit levels for groceries range from 1 to 3 percent.
Of course, your grocery bills will ratchet up further and further if the business tax is approved.
City Manager Ed Shikada estimates the business tax will bring in between $22 and $26 million to city coffers annually, depending on the square-footage charge. Keep in mind this city has an annual budget of nearly $1 billion.
Shikada also announced last week that the five biggest businesses in the city would pay 20 percent of the total business tax revenue, thus creating a bigger burden for the medium-sized businesses. Perhaps this is because the city manager fears that bigger businesses may move out. While his report did not name the top five, Hewlett-Packard and VMware are included. However, by comparison, in Mountain View, the five biggest businesses pay 77 percent of the business taxes, while in East Palo Alto, they pay 79 percent, according to the Daily Post.
Mountain View has a business license, based on the number of employees. But businesses pay he most annually – Google, $3,528,095; Microsoft, $160,445; Intuit, $222,320. Obviously, Mountain View’s philosophy of relying on the big companies to pay the most differs from what Shikada is proposing. Mountain View raises about $5 million a year from business taxes. As I said, Palo Alto would raise an estimated $22 to $26 million.
Menlo Park has a business license tax, based on gross receipts, and the maximum amount a company with up to $30 million in gross receipts is $8,000 per year.
Palo Alto City Council will discuss its business tax proposal this coming Monday, June 13, and a final vote as to whether it will be put on the ballot will occur at the council’s June 20th meeting.
Six of the council members have continually – and pretty steadfastly – supported imposing a business tax, along with City Manager Shikada, probably because the tax means they will have more to spend on anything they want. Only council member Greg Tanaka has been adamantly opposed.
At first, the city council was unsure of how the money they collected would be spent. After residents demanded to know how is this money going to be used, the council came up with a big wish-list. That’s been refined now to six categories – grade separation and rail safety; affordable housing and homelessness; public safety; improvements to University and California avenues; public safety, and downtown improvements. No details of how the money will be spent to achieve those goals, but it‘s a great sales pitch list to convince people that somehow new tax will provide solutions to all these issues. Don’t be fooled.
Remember, this tax will not be earmarked and revenues will go into the general fund, so in the future, it can be spent anyway the city manager and council want – including more money for city employees and a hike in their handsome pensions.
I would hope many of you will present your views on this proposed business tax to the council at next Monday’s meeting, June 13. You can participate via Zoom. (Check the city’s web site for specifics.) If adopted, it will affect how much you will spend on groceries and retail products for years to come, since this tax has no end date, no sunset. It will be a forever tax in our fair city,