Cutting the Newport Beach Business License Tax

Share this:

By Kurt English | NB Indy

Two weeks ago in this column, I reviewed the city business license tax in Newport Beach. The current business license fee is $159 plus an additional $8 per employee up to an additional $797 for businesses that collect sales tax, and an additional $16 per employee up to $1,595 for other businesses.

By contrast, Irvine only charges $50 a year for its business license fee. One of my clients recently paid $91 for a business license in Huntington Beach. Even better, Laguna Niguel, Dana Point and Laguna Woods have no business license fees or taxes.

The Small Benefit of the Business License Tax

According to city officials, Newport Beach collected $4,145,665 in business license taxes during fiscal year 2012-13. City officials also indicated that General Fund Revenues were $170,408,187 during that year. So the Newport Beach business license tax only provided 2.43 percent of the city’s operating revenues

Like the federal death tax, Newport Beach’s city business tax is punitive while providing little value. One liberal economist estimated that Americans spend almost as much on avoiding death taxes as the amount of estate taxes collected by the federal government. If the federal death tax were repealed, other analysts estimate that the additional capital gains taxes collected from ending the step up in basis of property at death would offset the lost revenue from the repeal of the death tax.

The Newport Beach business license tax has a small impact on city revenues. It would be hard for a city council that spent wildly on the expensive new city hall to argue that 2.43 percent of the city’s revenues were crucial to the city. The Newport Beach business license tax is much larger than the business license fee in a number of other cities in Orange County.

We are already in an environment of unjustly high federal and California state income taxes.  Taxes for Newport Beach residents are too high. Sadly, a bare majority of California voters foolishly approved an increase of the top marginal state tax rate to 13.3 percent in 2012.  Democrats raised the top marginal federal income tax rate to 39.6 percent. So before Newport Beach residents pay any money to the city, some have paid or owe the state and federal government about half of what they earned.

How much would the city make in increased sales tax revenue from more business choosing to locate in Newport Beach? More people working in Newport Beach would mean more customers would be available to buy more from Newport Beach retailers. How much more business would Newport Beach’s retail businesses get from the increased number of employees working in Newport Beach?

Politics and the Business License Tax

It will be interesting to see if politics of the Assembly race impacts the council’s willingness to eliminate a punitive tax. One Assembly candidate is Newport Beach Councilman Keith Curry.  Another is Matthew Harper, the Mayor of Huntington Beach. Eliminating the Newport Bach city business tax would provide an opportunity for Curry to claim an advantage against long time conservative activist and office holder Harper in the competitive race for state Assembly. The Assembly District has voters both in Newport Beach and Huntington Beach.

City Council candidate and former Newport Beach Planning Commissioner Scott Peotter advocates reducing the Newport Beach city business license tax to the level of an administrative system with a nominal fee of $25 or $50 a year for business with a physical location in Newport Beach. Peotter wants businesses doing temporary work in town or with home offices to be exempt. He advocates that the main purpose of a business license tax would be to maintain a database of important information, such as the location of any hazardous waste, provide emergency contact information for police or fire personnel, and to assure zoning compliance.  Fire personnel need to know of the presence of hazardous materials before going into a building.  For example, Peotter doesn’t want a property zoned exclusively for industrial use to be used solely for office space because of the increased parking requirements and traffic that would result.

Eliminate the Business License Tax

The city council should vote to eliminate the Newport Beach business license tax.  There would be a lot of benefits to businesses in Newport Beach, and more may be willing to locate in Newport Beach as a result.



Share this: