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SMRR Proposes Business Tax Hikes, Chamber Stunned

Bob Kronovetrealty
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Santa Monica

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By Jorge Casuso

May 7, 2020 --- Santa Monicans for Renters' Rights (SMRR) on Monday proposed hiking taxes on select businesses to help the city recover from the steepest and swiftest economic downturn in its 145-year history.

In a letter to the City Council, the powerful political group urged members to place "an equitable gross receipts type tax measure" on the November ballot to help bridge a projected $150 million budget deficit triggered by the coronavirus shutdown.

The proposed measure, wrote SMRR Co-Chairs Denny Zane and Michael Soloff, would boost the general fund by " targeting larger businesses that do not currently contribute a fair share to City revenues."

The measure would give voters "the opportunity both to more promptly restore essential services and associated personnel, and to provide greater resiliency to the City’s budget on a going forward basis."

Representatives of Santa Monica's crippled business sector, which already faces a daunting path to recovery, called the proposal "mystifying" and "unreal."

"This is the equivalent of prescribing a diet in the midst of a famine," said Dave Rand, the Chamber of Commerce's new chair, whose first task was to lay off staff.

"The idea of a brand new sweeping tax is mystifying to me, and I consider myself a liberal," he said.

SMRR's proposed tax would target businesses such as "banks, digital firms, studio offices, law firms (and) biomedical firms" that "have, for the most part, been much less harmed by the shut down."

These companies have "a professional highly paid workforce that can more readily work on line and Zoom around the world, state, and region," the letter said.

Santa Monica, SMRR argues, relies too heavily on hotel bed taxes and retail sales taxes, which generate 34 percent of the City's General Fund revenue and were among the hardest hit sectors of the economy.

SMRR points to San Francisco, which generates 17 percent of its general revenue from "a payroll tax, a business registration fee, an administrative office tax, and a gross receipts tax."

By comparison, Santa Monica reaps 7.7 percent of the general fund revenue from the City's "very low" business license fee, which ranges from 0.125 percent to 0.5 percent.

“Both in the short term and in the long term,” SMRR wrote, “it is important that the City diversify its revenue base."

Rand counters that it's not just hotels, restaurants and retailers that have been hard hit by the shutdown.

"Nobody is flush and profiting from the calamity," he said. "Just because another municipality has done something doesn't make it a good idea."

Rand worries that SMRR's proposal will divide the city's stakeholders at a time when everyone is pulling together.

"I feel there is a new-found openness for creative ideas," Rand said, "and SMRR is out there on an island.

"It's an easy short-sighted, populist sentiment -- just tax the businesses," he said. "It's shocking."

Chamber President Laurel Rosen said Santa Monica's economic recovery will depend on business thriving again.

"Businesses have to prosper," Rosen said. "If businesses prosper, the city prospers."

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