In the next election, the voters of Palo Alto will also be asked to approve Measure A, Palo Alto's new, proposed business license tax. I will be voting against this Measure. As a former small business owner, I am not, in principle, against a business tax. The tax being proposed in Measure A, however, is not well thought out and, given the alarming loss of businesses in Palo Alto, could not be timed more poorly. (While Measure A would not become effective for another year if it passes, the negative impact in terms of attracting new businesses will be felt immediately.)

The basic principle for an acceptable business tax, in my opinion, is that it be no greater than the business tax assessed in the cities with which Palo Alto competes in attracting new businesses. The tax being proposed by the City Council does not satisfy this principle. In addition, by taxing businesses based on the number of employees, the City is incentivizing businesses to fire employees and restrict employment. I do not support a tax that provides such negative incentives.

What would an acceptable business tax look like? One possibility is a tax based on receipts that exempts small businesses and is graduated, up to an acceptable maximum amount, for larger businesses. While I am aware that many businesses do not prefer a receipts-based tax, primarily due to issues of confidentiality, I believe such a tax is more meaningful, is easily calculated (the software for my business provided this information instantaneously back in 1994), and that the confidentiality concerns can be resolved.