Lalloway seeks to eliminate Irvine’s Business License Tax; How about the Hotel Improvement District Tax?

Irvine Mayor Pro Tem Jeff Lalloway has proposed eliminating the city of Irvine’s business license tax program which amounts to $51 a year for any business in the city from giants like Broadcom to mom-and-pop shops.  The program generates just under $1 million a year but according to Lalloway, it costs $600K to administer, but a 40 percent profit is somehow bad for a program that doesn’t hurt any business’s finances and provides the city with valuable data on business names, locations, contact details used by law enforcement and fire departments in the case of an emergency.

The tax, championed years ago by former Republican Mayor and Council member Mike Ward, is remarkably low for businesses who operate a hot dog cart to a multi-million multinational corporation — same price (take note Santa Ana).

The city council basically shelved the proposal on a 3-1 vote (Lynn Schott was absent) and Lalloway did a fine whine and dance on the vote.  From the Daily Pilot:

“I’m just sad,” Lalloway said, “that in an already overtaxed society, we can’t even get rid of a meaningless tax that would return a million dollars to the people of Irvine.”

Lalloway assumes repealing this means the million dollars would go back to the people of Irvine but he forgets a number of people have businesses in this city without living here.  He also suggested that there are hundreds or thousands of businesses who operate in the city without a license.  Perhaps, the city ought to go after these tax cheats for failing to have a business license and it might bring even more money to the city’s coffers.

Lalloway’s proposal was embraced by the City’s Chamber of Commerce; Irvine Chamber CEO Tallia Hart sent this letter to the city council dated March 9:

On behalf of the Irvine Chamber of Commerce and the entire business community that we represent I am writing to express our general support for the proposal to eliminate business licenses.

Irvine is the economic center of Orange County and our local business community Is renowned for its strength and resiliency. That is a testament to the business friendly environment that the City of Irvine has cultivated over the past few decades.

Unfortunately, our economic success is partially diminished by the great regulatory burden that is placed on all businesses in the State of California. While we can’t control the decisions that are made in Sacramento, we CAN do everything possible to ease that burden with the decisions that are made In our City. This endeavor is a smart and forward thinking way for our City to lessen the overall burden.

While we enthusiastically support this in principle, we encourage thoughtful consideration of how it is implemented. The Irvine Chamber of Commerce would like to offer its support as a resource for this effort as it progresses. We are happy to facilitate information gathering, provide feedback from local businesses and assist with outreach to ensure that this proposal achieves Its desired goals.

Thank you for your consideration on this matter. We appreciate the Council’s dedication to our local economy.

So, if Lalloway believes we’re overtaxed and Hart wants us to do what we can to ease the burden, I’d like to propose the elimination of a city tax (who says liberals can’t identify taxes to cut?) — specifically, Hart and Lalloway ought to support the elimination of the Irvine Hotel Improvement District Tax which was championed by Beth Krom and Larry Agran in the middle of last decade.

What’s the HID tax?  It’s a 2% bed tax applied to Irvine Hotels and paid by guests which is added to the 8% bedtax the city already gets from Hotels.  This means business travelers staying in Irvine hotels pay an extra 10% for the privilege of doing business in the city and it’s expected to be about $2.5 million — a lot bigger tax to cut that Lalloway is after.  An extra 2% tax on business travelers sounds pretty anti-business to me.

The catch here, HID is expected to generate $2.5 million in 2014-2015 revenues with 75% of this — about $1.875 million — going to the Chamber of Commerce.  The remaining $625,000 goes to the Barclay Theater — funding for which Lalloway tried to kill in 2013.  Since the city strongly supports the arts, and we’re allegedly flush with money (as Mayor Choi made the case for his Library project), it’s a matter of moving some things around on the budget to keep supporting the arts at the Barclay and let the Chamber get by without government support.  It might mean the Chamber will have to raise dues from the $410 it charges sole proprietors or the $2,600 it charges members — a lot more than $51 — but at least they can pay those big Chamber salaries under their own steam while walking the walk and talking the talk on eliminating unneeded taxes that burden business by reducing the tax hotels collect for the city by 2%.

We’ve left several messages asking for the Irvine Chamber to call us back over the past 48 hours to see what they might think of our idea and Ms. Hart seems too busy to do so (she confused me with Erwin Chemerinsky once).

But a thought — if you eliminate the City’s Business License tax, just where is the Chamber going to get the raw data on potential new members who are paying into the city’s license program for recruitment?  The best way to reduce cost for the city’s business license program — get rid of paper and place it online.  Plus eliminating the HID tax means Lalloway has killed another Democratic spawned idea.

(A disclosure: I pay a business license tax in Irvine and in Tustin; eliminating both of those isn’t enough to let me create a new job or pay my employees any significant raise; it’s a lunch for my team; my business license is a requirement for my office insurance).