National City's council voted down a plan to ask voters this November to overhaul the city's decades-old business tax, cutting off the fastest route to closing an estimated $13 million budget deficit. The council majority rejected the measure after hours of public testimony, splitting sharply between city officials pushing for new revenue and business owners demanding more time to review the plan.
According to 10News, council members Jose Rodriguez and Ditas Yamane voted in favor of placing the measure before voters, while the rest of the council said the proposal needed more public outreach and discussion first. City officials said the tax increase was needed to address the deficit and fund public services, including public safety. The proposed measure would have asked voters to base National City's business license tax on total revenue rather than profits.
Process Draws Fire From Business Owners
Opponents told the council the process moved too quickly, noting that the 53-page ballot language was made public only a day before the vote, the outlet reported. Business owners said they opposed the measure as written, and Sherry Gogue said many people learned about the proposal only two months earlier.
At the meeting, Sherry Gogue said everyone wants to help National City, but that the process needed to be done correctly. Mike Thomas said business owners look forward to working with the council in the future, adding that he believed the council made the right decision. Joann Fields said the city does have a deficit, but that other ways exist to reduce it, and that National City was moving in the right direction by not rushing the measure.
A Tax Code Frozen Since 1979
City staff projected in April that replacing the flat-fee code with a progressive gross-receipts model could generate up to $7.5 million in new annual revenue, according to Voice of San Diego. The rejected measure would have marked the first major overhaul of National City's business license tax in 47 years, with city leaders saying the structure had not kept pace with the city's growth or rising service costs. A separate 2026 study by consultant HdL Companies found National City collects roughly $760,000 a year in business license taxes from more than $4.84 billion in total business gross receipts citywide — an average of about $130 per business, the lowest yield among San Diego County cities studied.
That flat-fee structure dates to 1979, and it caps what any business can be charged no matter how large it grows, the analysis found. A corporation grossing more than $100 million a year pays a maximum of $1,720 annually under the cap, an effective rate of about 0.0017 percent, while a small contractor grossing $45,000 pays $20 a year, a rate more than 25 times higher at roughly 0.044 percent.
Sales Taxes Carry Much Of The Load
National City leaned on general sales taxes for $24.7 million in the last fiscal year, compared with the $760,000 collected from business license taxes, the same analysis found. The city's 8.75 percent local sales tax rate already runs a full point higher than the 7.75 percent rate in neighboring San Diego and Coronado, limiting officials' room to seek yet another sales tax increase.
National City would have joined six other county jurisdictions that already levy gross-receipts business taxes — Del Mar, Carlsbad, Oceanside, Vista, San Clemente and Escondido — but it remains the only one of that group to cap the maximum amount a business can be charged, per the same review. Business tax reform advocates argued that removing the cap would bring National City in line with its neighbors.
Other Bills Piling Up At City Hall
The tax fight comes as National City juggles other costly obligations. In June, the council adopted an $89.1 million general fund budget that leaned on unassigned reserves to cover the deficit, and it is still contending with a $15 million harassment verdict that now represents nearly half of the police department's $33 million annual budget.
Also looming is a possible in-house ambulance service. City officials said in July that launching municipal ambulance operations under the fire department could require more than $6 million in startup costs, after current provider American Medical Response, per inewsource, indicated that serving National City alone isn't financially viable. The council in June also locked in a new city manager and attorney, appointing Doug Schulze at a $300,000 base salary and Heidi Skinner as city attorney to help steer the city through its fiscal challenges.
Council Orders More Outreach Before Next Attempt
The council directed staff to expand public education and outreach, explore creating advisory committees, and continue studying the proposal ahead of any future attempt. The National City Firefighters Association had backed the measure, with supporters saying additional revenue was needed to maintain essential services as costs continue to rise. Under California's Proposition 218, general tax measures must go before voters at a regularly scheduled general election, meaning a revised proposal can't reach the ballot until November 2028.
