Institute a business surcharge for new capacity transportation using a simple formula, friendly to business
The Vancouver city Council has put off making a decision on the proposed business fee, which has been in discussions for well over a year.
The city wants to raise $3 million for new capacity transpotation from the business community to augment a three pronged plan to raise $11.5 million for transportation and public safety, which includes a property tax increase and a sales tax increase.
To recap: In May of last year, a business head tax of $7.50 per employee per month was shouted down. Greater Vancouver Chamber of Commerce President John McKibbin said resistance to the fee was significant, stating the fee was “punitive, much like a Business & Occupation tax.” Arguments that it would punish businesses for growing were the loudest.
In August a tiered business license surcharge was sent back to the drawing board. It required companies with three to five employees to pay $175, businesses with six to 50 employees to pay $1,250 and businesses with more than 50 employees to pay $3,750. Businesses in the mid-sized bracket complained because their per-head fee was much higher than very large businesses.
Before the council sent this iteration back, Mayor Royce Pollard pointed out that if the fee is adjusted to favor another group, “all we’re going to do is change the crowd in here next time.”
Last month the city heard the first reading of an ordinance that asks for a $275 business license surcharge and a $15 per employee head tax, capped at $10,000 annually, and scheduled a second reading for last Monday. The ordinance included a sunset clause after six years and an annual review to assess the effectiveness of the program. The ordinance was sent back to staff again to remedy inequities to small businesses and the hearing was postponed.
Vancouver’s business and occupation tax was eliminated in 2002, following a 10-year phase out, in part to satisfy concerns of businesses in soon to be annexed areas not required to pay a B&O tax at the time. A B&O tax based on gross receipts could more than cover the $3 million the city is targeting from businesses. The B&O tax is back on the table, and while some say it’s fairer than an employee fee, the argument is still that it pulls unfairly from business’ bottom lines.
We applaud the business community’s willingness – lead by the Greater Vancouver Chamber of Commerce – to step up and be a part of the conversation. But while businesses say they need and support new capacity transportation, we are hearing that small to medium-sized businesses are not stable enough yet and that large businesses will take a hit for growth or relocating here.
The original rational for going back to the business community for additional contribution to the overall tax revenue was that the percentage of taxes coming from businesses was less today than it was 10 or 20 years ago, yet, the results of a recent financial analysis by the city indicate that Vancouver residents are willing to pay enough for needed transportation improvements to fully fund Vancouver’s long-range transportation plan.
A survey of city residents revealed that the average amount that city residents said they would be willing to pay ranged from $27 to $45 per month per household. However, according to the city’s Web site, it would not be necessary to collect that much, because it would only cost around $14 per month per household to raise an additional $11 million per year.
Believe it or not, businesses are still stinging from the dot-com bust and subsequent recession. Our suggestion? Ask for a little less from businesses – after all, business owners are also residents, and residents by far are the fastest growing segment of taxpayers in the city. Institute an annual business license surcharge that would sunset after six years but abandon the focus on what percentage business “must” provide and look to what makes sense and encourages business.
Save non-traditional businesses whose workforces may vary throughout the year an accounting headache by eliminating a per-employee fee and raise from businesses only what you can’t raise from the residential sector. And wait, please, for the next round of annexations to complete. Isn’t that how the B&O tax got repealed in the first place?
