LOS GATOS, CA – FILE: A sign stands in front of the Netflix headquarters on July 20, 2011 in Los Gatos, California. Netflix announced September 15, 2011 that it expected to lose one million subscribers to its service after announcing a rate hike earlier this year. Its stock has dropped over 15 percent since the announcement. (Photo by Justin Sullivan/Getty Images)
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Go to the head of the class if you knew that the last time Los Gatos updated its business tax, George H. W. Bush was president, “Silence of the Lambs” was playing in movie theaters and the San Jose Sharks were in their inaugural season.
The year was 1991, and Netflix, one of the town’s major businesses, wouldn’t be founded for another six years.
Today, the Town Council is facing a $3.5 million budget deficit that is projected to continue for the next four years. To help close the gap, the council considered a sales tax increase but rejected it in favor of increasing the business tax.
Voters should approve Measure J, which would raise an estimated $1.1 million annually to help deal with the deficit.
The business tax hike is aimed primarily at larger businesses.
About 75% of Los Gatos businesses are taxed under a flat tax with different fees for different businesses. Measure J would increase the flat tax by 30% and continue the current annual adjustment for inflation. The hike would increase the range of the existing tax of $7.50 to $630 to $9.75 to $819 annually, depending on the type of business.
Los Gatos also has a tax on retailers that is based on gross receipts. Businesses with less than $50,000 in gross receipts would not be subject to any increase. Measure J would increase the existing tax on businesses with more than $50,000 in gross receipts by 40%. A business with between $900,000 to $1 million in gross receipts, for example, would see its tax increase from $600 to $840.
Finally, Measure J would add e-commerce companies to the gross receipts tax for the largest companies in manufacturing, wholesaling and jobbing. The measure would increase that tax by 120%. For example, a business with gross receipts of $10 million to $10.5 million would see an increase in the annual tax from $4,500 to $9,900.
Los Gatos was overdue to update its business tax. Voters should approve Measure J on the Nov. 8 ballot.
