With the business community divided, can labor and progressives force a business-tax reform that actually increases revenue?
But it's clear some businesses those with high gross receipts but low payrolls — would pay more taxes. For example, the finance, insurance, and real estate sector now pays about 16 percent of the $410 million the city collects in payroll taxes. That would go up to about 21 percent under a gross receipts tax.
"Several industries that could face higher taxes under the proposal, such as commercial real estate, large retailers, and large construction firms, felt the increase was too sharp," the report said under the heading of "Policy Issues Arising From Meetings with Businesses."
The report highlighted how the change would broaden the tax base. Only about 7,500 businesses now pay the payroll tax (others are either too small or are exempt from local taxation, such as banks), whereas 33,500 companies would pay the gross receipts tax, which the report identified as another issue to be resolved.
"While some businesses appreciated the base-broadening aspect of the gross receipts proposal, others felt that too many small businesses were being brought into the Gross Receipts tax," the report said. Hauge also told us that he fears a tax increase on commercial real estate firms could be passed on to small businesses in the form of higher rents. "I don't want to see the business community split," Hauge said, although it's beginning to look like that might be unavoidable. The big question now is whether progressives and labor can find any allies in this messy situation, and whether they'll be able to agree on a compromise measure that all sides say is preferable to competing measures.