That's because the city says it's so financially strapped it needs every $60 fee each of those small businesses now must pay per year for a license tax. From those businesses, the city annually receives about $280,000.

Meanwhile, the city is raising a host of fees for services and considering a multimillion-dollar property or parcel tax to fund increased law enforcement.

"I'm concerned about taxing people with home-based businesses," Councilmember Danny Wan (Grand Lake-Chinatown), chairman of the finance committee, said at Thursday's council meeting. "We want to encourage this kind of entrepreneurship, and help it blossom into real businesses."

About 7,000 Oakland residents received city notices in March informing them they had failed to pay the tax and owed back payments, including interest, plus a penalty equivalent to 25 percent of the tax. Many were outraged, saying they did not know about the city tax.

Had the council decided to waive the penalties and interest, and reimburse those who already paid, the city would have lost $5.9 million.

"This tax is grossly unfair to small businesses like me," said Paula Li, a Rockridge resident who said she makes only about $2,000 a year from her home-based business.

Councilmember Jean Quan (Montclair-Laurel) said the exemption would help teenagers and senior citizens earn a little extra income from such jobs as mowing lawns or teaching piano.

Only Councilmember Desley Brooks (Eastmont-Seminary) voted against the change, urging her colleagues to postpone any action until a comprehensive study of the city's business tax code could be completed.

Brooks' motion failed by two votes. She was joined by Councilmembers Nancy Nadel (Downtown-West Oakland) and Henry Chang Jr. (At-large). Councilmember Jane Brunner (North Oakland) abstained from the vote.

Minutes later, both Chang and Brunner changed their votes and approved the change to the tax code, siding with Wan, Quan, Council President Ignacio De La Fuente (Glenview-Fruitvale) and Councilmember Larry Reid (Elmhurst-East Oakland.) Nadel abstained from the second vote.