Silicon Valley wants to tax big tech firms just like Seattle did

SAN FRANCISCO: Seattle levied an annual tax of about US$50mil on big companies last week to help solve the city's homeless problem.

The tax was watered down from the original proposal but it was controversial and pitted the city against its most powerful corporate resident, Amazon.com Inc. Now the action moves to Silicon Valley and the Bay Area. San Francisco, Mountain View, Cupertino and East Palo Alto are all considering similar taxes on large local employers (read: tech companies) to offset growing inequality and overcrowding they blame on the industry that turned them into boomtowns.

The optics don't favour Big Tech. Seattle’s tax measure passed the city council unanimously. In the Democratic enclaves of Northern California, meanwhile, office-holders say the corporate tax cuts enacted last year by a Republican-controlled Congress make cash-flush technology companies an appealing target. Alphabet Inc’s tax bill alone dropped by almost US$1bil in the first quarter thanks to the tax law championed by President Trump.

“Google has billions of dollars in cash floating around,” says Lenny Siegel, the mayor of Mountain View, where Google is headquartered. “They made billions off the tax bill. They can afford to spend a little more here.”

Technology companies have long manoeuvred to kill local taxes, deploying a mix of public posturing and backroom wrangling. They’ve also made neighbourly gestures: Google funds a public electric shuttle service in Mountain View; Amazon gives away free bananas. For cities looking for more largesse from their hometown giants, there's always the threat that tech companies will expand elsewhere. The companies fear that one tax increase will lead to another and, before they know it, they’ll find themselves underwriting the People’s Republic of San Francisco.

Mountain View – a city of 76,260 that swells to more than 100,000 during the workday-is a tech-industry town if there ever was one. Alphabet, Intuit Inc and LinkedIn are among the city's biggest employers, and self-driving cars are a common sight.

During rush hour, highways slow, clogged with thousands of tech industry workers migrating to their jobs. The city’s own head tax proposal could cost major local employers between US$250 and US$300 a head and is expected to face a city council vote next month.

Siegel, who co-authored the measure, says he hopes to generate US$10mil in revenue a year from the tax to make it easier to get around town. One option under consideration: a new elevated automatic rail line bridging the city's transportation hub with another part of town.

“If we build that, Google would be a primary beneficiary,” he says. “It’s not like we’re taxing them to pay for something that has nothing to do with them.”

The mayor says the city was considering a tax based on employee headcount rather than revenue because it’s simpler.

“If somebody in France clicks on a Google ad and Google gets money,” Siegel says, “where does Google report that sale? Probably in the Cayman Islands.”