NATIONAL CITY (KGTV) — National City is considering a proposal that would overhaul how businesses are taxed for their annual operating licenses, a change that could generate significantly more revenue for the city but has already drawn opposition from the regional business community.
City staff proposed the change as a way to help close a $13 million budget deficit. Under the current system, businesses pay a flat fee for their license. The new proposal would shift to a tiered structure — the more money a business makes, the more expensive its license would be.
A city staff member who helped draft the proposal said every single business, big or small, would see some increase. Those increases are projected to bring in about $7 million for the city, up from the $700,000 it collects now from the business license tax.
The new proposal also includes taxing the gross receipts of property owners who are renting out their homes.
The San Diego Regional Chamber of Commerce has been sending texts to National City residents urging them to call city council members and tell them to vote no on this potential reform.
Chamber President Chris Cate said the proposal is the "worst tax that can be placed on a business", given that other operational costs are already rising. Small businesses tend to run on "razor-thin margins".
"There's no differential between a larger business or a smaller business," Cate said. "They're gonna have to pay something, and they're going to have to pay something that's going to be passed on to consumers".
National City Councilmember Jose Rodriguez has been responding to the texts on social media, calling them "another series of lies from San Diego Chamber of Commerce," and claiming "small businesses would be impacted very little, if at all". He described the reform as a chance to get wealthy companies to pay "their fair share" for doing business in the city.
He declined an official interview request.
Mayor Ron Morrison said he only learned of the proposal less than two weeks ago. He believes sending this to a ballot measure with little to no time to meet with local businesses is wrong on the city's behalf.
"Our businesses said, 'yeah, we're willing to sit down and talk with you, but we don't even know what this is" and when they've asked staff, staff hadn't had any answers for it," Morrison said. "So that's not good governance. That's not the way to do things".
Morrison feels the city needs to consider making cuts to contracts and other spending to shrink its deficit before potentially adding a new tax.
"The vast majority of the income of the city comes from businesses. It doesn't come from residents or anything else," Morrison said. "We should be concentrating on where we can make cuts, not just where we can start gouging people with more taxes".
The San Diego Chamber of Commerce is echoing Morrison's sentiment on this tax, agreeing that it needs to be vetted more thoroughly with businesses in the city.
"It's ill-prepared," Cate said. "You need to go back to the drawing board and have a really open conversation about what you're trying to accomplish and what the impacts would be".
National City is holding a special meeting on June 30 to hold the vote on this reform. If approved, the tax proposal will head to the November ballot for voters to decide.
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Adam Campos is a South Bay reporter for ABC 10News. If you have a story idea, you can reach him by email at adam.campos@10news.com or through social media.
