To turn a catch phrase on its head — San Jose does not have a spending problem; it has a revenue problem. The City has a structural deficit because revenues are insufficient to pay for essential services. That structural deficit predates the catastrophic losses to the City’s two pension funds, and without more revenue it will continue, despite the fact that the City is instituting pension reform.
Even the City business community now supports a tax increase. At yesterday’s City Council meeting, Chamber of Commerce head Matt Mahood and Silicon Valley Leadership Group head Carl Guardino joined organized labor in backing an additional 1/4 cent sales tax. Now, for the first time in memory, there is a consensus that City taxes should increase. The City Council voted 9-2 to put a 15 year 1/4 cent sales tax on the June ballot.
San Jose State Professor Scott Meyers-Lipton and others have argued that a gross receipts tax (GRT) would generate more revenue to close the City’s structural deficit and it would be more equitable. The City staff’s memo on the GRT provided evidence in support of those arguments. However, the business community hates the GRT, and Mayor Liccardo managed to address tax equity concerns with an alternative proposal to double the City’s business license tax.
The Mayor’s proposal helps ensure that the increased tax burden does not fall only on City residents, but is borne as well by City businesses. In combination with the 1/4 cent sales tax, the increased business tax will close the structural deficit and restore essential City services in a way that is fair to residents and businesses. The City Council passed a motion to pursue a doubling of the business tax on a 10-1 vote. In June the Council will vote on the language of a tax measure for the November 2016 ballot.
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