‘Head tax’ on companies goes to council vote
Proposal, generating $6M a year, could make it on November ballot
Ever since Mountain View Mayor Lenny Siegel arrived in City Hall three years ago, he’s been looking for a way to get local companies to help pay for the traffic problems they help create.
That issue will come to a head in a vote today that could have repercussions far beyond the borders of this city of 80,000. Mountain View’s City Council will consider asking its voters in November to approve a “head tax,” which would charge businesses based on their number of employees.
To supporters such as Siegel, the proposal — which would generate $6 million a year — is an effective way for the city to take charge of its growth and a future that rests on a massive Google-centered North Bayshore development, including 10,000 new homes, shops and 3.6 million square feet of office space.
“The logic was, there’s a correlation between traffic generated and employment,” Siegel said in explaining the birth of the proposal.
But some business advocates call it a tax on jobs. And how the council decides to proceed may do much to define the role cities want businesses to play in addressing the Bay Area’s crushing
traffic and soaring housing costs.
Mountain View, which has encouraged other cities to follow its lead and build more housing, could pave the way for nearby communities.
Cupertino, where Apple is headquartered, this month put discussion of a new head tax on hold until at least next year. In Sunnyvale, home of LinkedIn, which has had a head tax since the 1970s, one councilman has suggested raising the tax but urged the city to go slowly before going to voters.
Mountain View’s current business tax, which generates $250,000 a year, hasn’t been changed in more than 60 years. Under a complex matrix of flat fees and per-employee charges, the smaller companies that make up 97 percent of the city’s businesses would pay less than the larger companies. Google — the city’s biggest employer by a long shot — would generate about half the $6.1 million in new revenue.
The debate over taxing business intensified after Seattle’s City Council enacted a head tax in May to address homelessness — only to repeal it weeks later after fierce opposition from an Amazon-led business coalition.
But Siegel sees Mountain View’s proposal as being different from Seattle’s. Unlike Seattle, Mountain View is putting its proposal to voters. The city has a better relationship with Google, he says, than Seattle has with one of its largest and most powerful employers, Amazon. Furthermore, Google
has maintained a positive dialogue with city officials over the head tax, which would fund transportation improvements that directly benefit Google and other large firms trying to recruit workers to a region known for horrendous traffic, Siegel says.
Google already has had a profound impact on the city where it has had its headquarters for 15 years. Estimated employment at the “Googleplex” has more than doubled in the past nine years, from 10,000 workers to more than 23,000, according to city documents. Symantec, the city’s nextlargest employer, has about 2,800 workers.
In the past, Siegel has pointed out that Google has worked hard to address the impact of its growth, with everything from commuter buses and employee bicycles to building housing as part of its North Bayshore expansion.
The amount Google would pay under the proposed tax — $3.3 million a year, according to city documents — is small compared with what Mountain View already gets from the company.
Google leases four properties from the city and paid $13.7 million in annual rent for three of them in the fiscal year that ends this month. It also paid $30 million up front for the 52year lease on the fourth parcel, a portion of the land for the North Bayshore development, according to the city.
Siegel believes the tax also would let Google pull back from its role as chief grantmaker for Mountain View projects. Since 2014, the company has given more than $14 million to organizations working in the city.
Google declined to comment on the proposed head tax, and Siegel said the firm has not told city officials its position on the tax.
“We didn’t want Google paying too much,” Siegel said. “On the other hand, we wanted them paying enough that the small businesses wouldn’t be overburdened. We’re trying to work with Google to try to solve some pretty serious problems that they are to a good degree responsible for.”
Under the proposed general tax, smaller businesses with 50 or fewer workers would pay a flat rate of $100 to $400 a year. Companies with 51 or more employees would pay a flat rate based on their size plus a per-employee fee, or head tax. The tax, to be phased in over two years starting in 2020, requires the approval of a simple majority of voters.
The council plans to spend 80 percent of the money on transportation and “innovative transit solutions” to ease congestion. The rest would go to affordable housing and services for the homeless. But because it can’t earmark a general tax for specific purposes, the council will vote separately today on a nonbinding pledge for how the money will be spent.
That’s one reason the measure has drawn fire from the Silicon Valley Leadership Group, a business trade association that represents Google and other Bay Area companies, large and small.
“They want the money. They don’t want the accountability,” said Leadership Group CEO Carl Guardino. “You’re talking about a tax for perpetuity that can be changed at any time for any purpose.”
To Guardino, a corporate
head tax is a “tax on jobs” that “limits the prospect of jobs in your community.”
While major firms might be able to absorb the cost of a per-worker tax, smaller companies such as restaurants and dry cleaners would suffer, Guardino said. Just eight of Mountain View’s businesses have more than 1,000 employees.
Recent polls conducted for the city show a majority of voters strongly support making big companies contribute to transportation improvements, but Siegel said a majority of businesses in Mountain View “don’t want us to tax them at the level that we’re proposing.”
Mountain View’s Chamber of Commerce met last
week with city officials and laid out the tax levels it wants to see: a rate no greater than $50 per year for the smallest companies and no more than double that for larger firms, according to chamber CEO Tony Siress.
If the tax moves forward and falls within the range acceptable to the chamber, Siress said, the chamber’s board may endorse it.
Jared Walczak, an analyst at the Tax Foundation, a conservative think tank, called head taxes “fairly unusual” in the U.S. Denver has had one for years, and Walczak says a few other cities in Colorado and Washington have them. “They’re rare for good reason,” Walczak said, adding that Seattle’s
experience shows why.
The business community attacked the tax as “an assault on the local economy,” and the public saw it as undermining the city’s competitiveness, he said.
While many cities have valid concerns about the cost of services for out-oftown commuters, Walczak said head taxes could drive jobs elsewhere, particularly from tech companies that don’t need local manufacturing facilities.
“These are really mobile jobs. They don’t all have to be in Silicon Valley or Seattle anymore. We now have tech hubs across the country,” Walczak said.