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By Tiffany Clark
SACRAMENTO, CA – As a Sacramento attorney and independent advocate for policies that support families and the smallest of small businesses, I’m urging voters to reject the City of Sacramento’s March ballot Measure C, on both procedural and substantive grounds.
On procedural grounds, because it was not only rushed over the holidays, without sufficient input from the lowest-income small businesses, but the city prevented arguments against the measure from appearing in the voter information guide—not because there weren’t any, but because the city strictly enforced opposing argument submission timing rules against others, while not complying with the rules itself.
On substantive grounds, because Measure C is regressive, haphazard and even more unfair to the smallest of small businesses than current law is, as I’ll illustrate using examples from my own family.
Yes, we need more revenue. Yes, we need to raise the cap on what big businesses pay. And, yes, as the city has also said, we need “fairness/equity,” so “similarly situated taxpayers pay similar amounts [and] differing ability to pay [is] taken into account.”
Indeed, for these very reasons it makes no sense for Measure C to so modestly increase the tax cap on the biggest businesses and provide a tax cut for most businesses making between $60,000 and $12.5 million gross per year, while asking most earning less than $60,000—who already pay the highest effective tax rates—to pay still more.
This is especially hard to stomach when the city reports that most of its “peer jurisdictions” have no tax cap at all and when two of its peer jurisdictions exempt small businesses entirely. That is, San Francisco exempts those earning up to $2 million in gross receipts and San Jose exempts those earning up to $29,160 in gross receipts and/or up to $58,320 in adjusted gross income.
Real people would be hurt by Measure C, since at least 50% of Sacramento businesses earn $100,000 or less per year and 25% earn $10,000 or less, while 70% of US home businesses earn $60,000 or less per year and 43% earn $10,000 or less.
For example, some part-time, low-earning licensed professionals like me would see our already high flat tax rates more than double, while other professionals and businesses earning up to $1.6 million would inexplicably pay less tax, violating both the city’s promise to accommodate “differing ability to pay” and its promise to tax “similarly situated” businesses “similar amounts.”
That is, not only would some licensed professionals “who are similarly situated” to other licensed professionals pay dissimilar amounts, such as licensed real estate brokers, who negotiated a special deal, but similarly situated licensed and non-licensed professionals are also taxed dissimilarly.
This means, although we are both professionals (one requiring a state license, the other not), under Measure C I would pay about 5x more than my husband on 87x less income. That is, I’d pay $684 on my 2023 part-time law practice income of under $3,700, while my consultant husband would pay only $138 on over $320,000—solely because of the immaterial fact that my profession requires a state license and his does not.
By comparison, all of the city’s peer jurisdictions would tax me far less than $684, i.e., $0 in San Francisco, $0 in San Jose, $25 in Bakersfield, $40 in Folsom, $60 in Oakland, $87.07 in Fresno (making the “alternate election”) and $272 in Long Beach (as a home-based business).
Even the State Bar of California charges less than $684 in annual licensing fees, and discounts for low-earning attorneys to boot. Currently, even Sacramento discounts for professionals licensed under seven years, which was critical for me as a young attorney with staggering student loan debt, starting my part-time law practice as a full-time parent of a special needs infant. However, Measure C would abandon even that imperfect proxy for income.
But that’s not all. Comparing my husband’s business with other businesses, like our son’s, all taxed under the flat tax plus gross receipts code section that covers most businesses, we can see how Measure C would double down on its already regressive approach, further thwarting its stated intention of accommodating “differing ability to pay.”
Like many start-ups, especially in the arts, our son made very little his first year in business as a musician, just $22.17. Still, the city took all of his income and then some in tax, charging $30, an effective tax rate of 135%. Meanwhile, San Jose and San Francisco would have taxed our son zero, as federal and state income tax authorities did.
However, under Measure C Sacramento would increase that to a whopping 226% effective tax rate, $50 on $22 gross income. Imagine seeing that rate on your federal or state income tax return this April! $50 might not sound like much, but when you’re making $22, it’s a lot, especially when peer jurisdictions like San Jose and San Francisco have shown us we do not need to resort to such regressive tactics in order to raise revenue.
It’s worse than that though because, by contrast, even now, his father paid just .048% on the over $320,000 he earned last year. Moreover, like most businesses earning between $60,000 and $12.5 million, he would actually get a tax cut under Measure C, paying an even smaller fraction of a tenth of a percent.
On top of that, businesses earning from $12.5 million to over $500 million would also pay just a fraction of a tenth of a percent effective tax rate under Measure C—even with its tax cap increase fully implemented—while a musician making $22 pays a triple digit effective tax rate.
The upshot?
The City of Sacramento needs to do better by its smallest businesses, whether they earn less due to newness in business, family obligations, partial retirement, medical issues, disability or otherwise. They cannot typically afford to have a representative at every council meeting—such as the last meeting before Thanksgiving, where the council approved Measure C for the March ballot, as the nearly last item on a long agenda, which brings me back to process.
Process matters. Here we had an unfair process, resulting in an unfair outcome. We cannot let this stand. I urge voters to reject this measure, sending it back to the city to rework it for the fall election, this time fulfilling the city’s promise to raise tax revenue with fairness and equity.
Tiffany Clark is a Sacramento attorney and advocate for policies that support families and small businesses.
