The Cost of Doing Business Goes Up : Santa Monica: Professionals and other business people will pay more for their licenses. The city will gain $2.9 million a year.

Santa Monica business owners will be paying higher business license taxes under a new schedule approved by the Santa Monica City Council this week.

For professionals such as attorneys and doctors, the new tax could be nearly three times the old rate. Auto dealers could pay as much as four times their current rate. The new rates take effect July 1.

The City Council had been scheduled to decide on the new taxes last week but postponed the vote when the meeting ran late. With the business taxes first on the agenda Tuesday night, the council took only half an hour to approve the recommendations made by the city Finance Department on a 4-2 vote.

Council members Christine Reed and Herb Katz voted against the increases, saying they thought the proposed increases were better dealt with as part of the annual budget process. Councilman William Jennings was absent for the vote.

The other four council members, however, said the increases were not that large and that the city needs the additional $2.9 million annually the higher taxes will bring in. The city currently collects about $6.8 million from the tax.

Finance Director Mike Dennis said the increases will bring the city’s fee schedule in line with that of nearby cities and distribute the tax burden more equitably among businesses. Dennis said the tax schedule had not been comprehensively reviewed since 1962, although some revisions were made in 1983 and 1984 for major business categories.

The schedule reduces the number of business categories from 73 to 16.

Several business owners complained last week that the increases were too large and not adequately justified.

But Mayor Dennis Zane argued that the new fees are still lower than those in Los Angeles and noted that Los Angeles is considering raising those taxes an additional 10%.

The current tax for professionals such as doctors and attorneys is now a base fee of $50 plus $1 for every $1,000 in gross receipts from $50,000 to $100,000, and $3 for every $1,000 in gross receipts over $100,000.

The new tax will increase to a base fee of $75 plus $5 for every $1,000 in gross receipts over $60,000.

Thus, the tax bill of an attorney grossing $100,000 a year would increase from $100 to $275, or 175%. If an attorney grossed $500,000 a year, the tax would increase from $1,300 to $2,275, or 75%.

The city staff originally proposed eliminating the existing $5,000 maximum tax for auto dealers and charging a base fee of $75 up to $60,000 in gross revenues, then $1.25 for each $1,000 over that amount.

But several car dealers complained that the higher tax could force some of them out of the city. City staff instead proposed a $20,000 maximum tax for auto dealers in fiscal year 1990-91, a $22,500 cap in 1991-92, and a $25,000 maximum for 1992-93 and each year thereafter.

According to Dennis, only 10 of the city’s 50 auto dealers will reach the first year’s maximum tax. The others will pay a base fee of $75 and then $1.25 for each $1,000 over $60,000 in gross receipts.

DIGGING A LITTLE DEEPER

Here are some examples of how the new business license tax schedule approved by the Santa Monica City Council would affect different types of businesses startng July 1. The taxes will be based on the type of business and gross receipts.

CATEGORY RECEIPTS OLD TAX NEW TAX *Professional $200,000 $400 $775 **Retail $5 million $6,107.50 $6,250 Auto dealers $10 million $5,000 $12,500

* doctors, attorneys, etc. ** department stores