What the Measure Would Do

This measure would provide a one-year tax “holiday” in 2027 for certain small businesses in Oakland. Specifically, it would eliminate the gross receipts tax (also known as the business license tax) for existing small businesses with less than $1 million in annual gross receipts across certain business classes, including retail sales, groceries, business and personal services, recreation and entertainment, and manufacturing. The measure would also eliminate up to $1 million in gross receipts taxes for all new businesses, regardless of size, that establish a commercial location in the city. The tax exemption would begin on January 1, 2027, and last for one year. The measure would authorize the City Council to extend the exemption annually for up to three additional years without returning to voters.

The Backstory

Since the COVID-19 pandemic, Oakland’s business community has experienced significant challenges. The measure was proposed to support struggling small businesses and encourage the growth of new businesses by reducing barriers to business operation and entry. It aims to revitalize struggling business corridors and fill vacant commercial spaces by making Oakland more attractive to entrepreneurs and new businesses.

Nearly 90% of businesses in Oakland are small businesses grossing under $1 million a year. The proposed measure would include retail sales, groceries, business and personal services, recreation and entertainment, and manufacturing, which account for 44% of all businesses in Oakland. Individual businesses would receive between $60 and $4,100 in relief based on their gross receipts.

The measure would have no fiscal impact on the city in the current budget cycle. In anticipation of the measure’s potential passage, the Oakland City Council set aside $3 million for general business support as part of the fiscal years 2025–2027 budget passed in June 2025. This amount is approximately double the revenue the city would forgo if the measure were approved. Should the City Council wish to extend this tax relief, approximately $2.2 million would need to be set aside annually to offset the revenue loss. If the measure does not pass, the $3 million set aside for this program would return to the city’s General Purpose Fund.

The city plans to measure the success of the tax relief program, if passed, by tracking the amount forgiven, the number of new business openings, and vacancy rates across corridors. Based on these metrics, the City Council will determine whether to extend the program.

Through voter-approved Measure T, Oakland recently updated its gross receipts tax to a progressive structure that places more of the burden on large businesses, 10% of which generate about 80% of total revenue. Because the proposed tax relief would not apply to these businesses, it would not significantly impact current gross receipts tax revenue, which makes up roughly 6% of the city’s income and 14.9% of Oakland’s General Purpose Fund. The measure could expand the tax base by encouraging new businesses to settle in Oakland and by helping existing small businesses stay there, but this outcome remains uncertain.

The measure is modeled in part on incentives such as San Francisco’s “First Year Free” program, passed in 2021 for small businesses making no more than $2 million in gross receipts. San Francisco paired this small-business tax incentive with complementary measures that support the successful recovery of small businesses, such as streamlining permitting and eliminating regressive license fees. Oakland recently initiated its own business permitting reforms.

Councilmembers Unger and Ramachandran introduced the measure in November 2025, and the City Council unanimously approved placing it on the ballot.

This measure requires a simple majority (50% plus one vote) to pass.

Equity Impacts

Tax relief for small businesses could help stabilize neighborhood commercial corridors with community-based businesses owned by people of color, provide local employment, and serve residents who may have limited transportation options or who shop locally.

The provision for new businesses could help reduce barriers to entrepreneurship and encourage business development in underserved neighborhoods with vacant storefronts. The potential benefits will depend on whether new businesses actually choose to open in Oakland and where they locate. Without targeted incentives for specific corridors or neighborhoods, the measure may disproportionately benefit areas that are already more attractive to new businesses.

Pros

• The measure provides relief to small businesses most likely to be struggling with operating costs and pandemic recovery.
• The measure signals and cultivates a business-friendly environment and relationship with the city in Oakland.
• Exempting new businesses from taxes for their first year could reduce barriers to entry and encourage entrepreneurs to open in Oakland rather than neighboring cities, potentially helping fill vacant storefronts, revitalize commercial corridors, and generate more long-term revenue.
• The funding has already been set aside in the budget, meaning the measure would not require cuts to other city services.
• The one-year structure allows the city to test the policy’s effectiveness before deciding whether to extend it.

Cons

• A one-year tax holiday provides only temporary relief and does not address the underlying challenges facing Oakland businesses, including public safety concerns, vacant office space, reduced foot traffic, and other start-up costs.
• If extended for the full four years allowed under the measure, the cumulative cost could exceed the initial $3 million budget, potentially requiring future budget adjustments or cuts to other services. Even though $3 million is a relatively small amount, the measure diverts resources that could be directed to other issues and relies on the potential of new business to generate revenue.
• The measure doesn’t target specific corridors or neighborhoods most in need of commercial revitalization, so benefits may disproportionately flow to areas already attractive to businesses.