Under heat from small-business owners, the Denver City Council on Monday initially approved reducing a new registration fee for the so-called “head tax” business owners pay on workers they employ.
To help close a $160 million budget gap last year, Mayor John Hickenlooper’s administration required businesses to pay a $50 registration fee every two years for what is formally called the occupational privilege tax. At Hickenlooper’s urging, the council on Monday halved that fee to $25 every two years for owners of one-person businesses so long as they pay the tax in full at the start of the year.
Administration officials originally projected the $50 fee would generate $1.4 million every two years and would cover processing costs.
Hickenlooper decided to tinker with the fee after he was challenged in March during a radio talk show by a business owner who employed only himself. The caller said he objected to paying the new fee, which would exceed the $48 his firm pays in occupational privilege taxes over a year.
The reduction could affect as many as 8,000 one-person businesses and reduce city revenues $30,000 to $200,000 every two years, budget officials said.
The council debated the merits of the fee Monday, with Councilwoman Jeanne Faatz protesting that it amounted to charging businesses a fee so the city could tax them.
“If we are going to be business-friendly in this city, this is the last thing we should do,” she said.
Councilwoman Peggy Lehmann countered that the tax ensures that suburban residents who work in the city help finance city roads they drive on. Councilman Chris Nevitt defended the fee.
“I’ve always been a cost-recovery hawk,” Nevitt said. “Our fees ought to cover the cost of doing business.”
Businesses pay $4 a month in occupational privilege tax for each taxable staffer. The tax, enacted in 1969 and last raised in 1988, also charges $5.75 per month per employee in Denver who is paid more than $500 a month. It generates $40 million annually.
The council approved halving the fee for businesses with one employee on a 9-3 vote, with council members Charlie Brown and Judy Montero joining Faatz in dissent. Council President Jeanne Robb abstained, saying she wanted to see more options.
The council still must vote one more time to grant final approval.
Christopher N. Osher: 303-954-1747 or cosher@denverpost.com
