The Newport Beach City Council just unanimously approved a new "fee" for donors amounting to 10% of the item's value.
This means that if I donate to the city a new pretty park bench that appraises at $500, then I'll need to cut a check to the city for an additional $50 to cover the city's maintenance of that item. But more on that later.
The United States of America gives financial incentives for certain behaviors, in the form of expense deductions and tax credits to everyone who files an income tax return. For instance, if you own a house, you are able to deduct the mortgage interest and property taxes.
The government wants you do to certain things and will pay you if you do. Simple, right?
So now let's look at the definition of a couple of words:
According to Dictionary.com, "fee" is defined as "a charge or payment for professional services (a doctor's fee) or a sum paid or charged for a privilege (an admission fee)," while the site defines a "tax" as "a sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc."
So when the council approved a new 10% fee/tax for donating a park bench or playground equipment, would you consider that a tax or a fee?
After all, is the 10% a charge or payment for professional services? Is it a sum paid for a privilege? Let's see, I donate something tangible and valuable to the city, whose privilege is it?
Or is the 10% a sum of money demanded by a government for its support or for specific facilities or services?
Based on Dictionary.com, that 10% "fee" sounds pretty close to a tax, so the "conservative" republican (small "r") council is levying a tax for the privilege of donating to the city.
I asked a nurse, a financial analyst and a restaurant owner that same question. The nurse and restaurant owner considered it a tax; the financial analyst said it was a fee.
Majority rules: It's a tax.
Would you think that the city is encouraging people to donate by charging a tax instead of giving you an extra tax break for being a great person by donating to the city?
Well Mark Harmon, the city's director of Municipal Operations, told the Orange County Register before Tuesday's council meeting, "We have a long list of people who want to donate. I don't think the fee will keep someone from donating."
However, the Register reported, "Harmon said he understood that the fees may appear to dissuade people from donating but said the city really just wants to ensure the item is maintained."
So if the city bought a bench and someone donated the one next to it, would the city maintain one and not the other if the donor didn't pay the 10% fee/tax?
Does it cost that much to maintain a bench or some playground equipment?
With a $263-million, 2012-13 budget and a $4.4-million surplus from 2011-12, I think bypassing this 10% fee/tax might have been a bit more prudent.
How much does the city hope to raise with this 10% fee/tax? A whopping $1,500.
Thanks, but no thanks. The juice is not worth the squeeze.
JACK WU is an accountant who lives in Newport Beach and practices in Costa Mesa. He is a longtime Republican Party loyalist and a volunteer campaign treasurer for Rep. Dana Rohrabacher (R-Costa Mesa). His column runs Sundays on the Daily Pilot Forum page. He can be reached at email@example.com.