Commentary: Modernize Costa Mesa’s business tax

I feel compelled to respond to Planning Commissioner Colin McCarthy’s recent commentary on Costa Mesa business taxes (“Don’t burden businesses with higher fees,” Aug. 4).

McCarthy seems to be making three points to support his view that business taxes should not be increased for the first time in 52 years: that businesses are already paying too many taxes, that they don’t receive anything in return for paying business taxes and that increased business taxes would chase businesses out of town.

First, McCarthy states that business taxes on Nordstrom, for instance, should not be increased because “Nordstrom pays more than its fair share of taxes through sales tax, unemployment tax, workers’ compensation and a whole host of other taxes this state deems necessary to saddle businesses with.”

Setting aside McCarthy’s apparent anti-tax bias, there are a couple of problems with this statement. For one thing, unemployment and workers’ compensation taxes don’t go to the city, so whether or not they pay them has no effect on the city’s budget. And businesses don’t pay sales tax — their customers (you and I) do; the business simply acts as a middleman between the customer and the state and city.

Second, the idea that there must be some direct nexus between the amount of business tax paid and city services provided to a particular business is absurd. These are taxes, not fees. They don’t provide any more or less “tangible return benefit to local businesses,” as McCarthy seems to want, than sales and property taxes.

All these taxes go to provide tangible benefits, such as fire and police protection (including officers dedicated exclusively to South Coast Plaza), street maintenance and other government services. Business advertising and “something to help their bottom line,” as suggested by McCarthy, are not appropriate uses of city tax funds.

Third, I’m sure we are all thankful that stores like Nordstrom are in our city. But we should recognize that it’s here to do business and make money, not to do the city a favor, or because our business taxes are lower than in other cities.

I can’t imagine that even McCarthy really believes, as he implies in his commentary, that Nordstrom — or any business, for that matter — would move out of Costa Mesa if the business tax were increased by a few hundred dollars a year. The difference in 10 years wouldn’t even pay for moving expenses and new stationery.

With the change in Consumer Price Index, the $200 maximum business tax enacted in 1961 is equivalent to about $26 today! To keep up with inflation, it should be more than $1,500 by now.

So, yes, let’s thank Nordstrom and all the other businesses for being here, but at the same time recognize that, while the cost of providing city services has increased since 1961, the portion funded by business taxes has dropped significantly over the past 52 years. It’s time to bring business taxes into the 21st century.

PERRY VALANTINE is a retired city employee and a resident of Costa Mesa.