The California communities of Cupertino, Mountain View and East Palo Alto have begun to ponder new taxes based on employer headcounts — levies that could jolt Apple and Google — and if voters endorse the plans, a fresh wave of such measures may roll toward other corporate coffers.
Alarmed by traffic and other issues brought on by massive expansion projects, the three Silicon Valley cities are pushing forward with separate plans to impose new taxes that could be used to make transit and other improvements.
“If we are successful in putting something together and (getting it) approved, I believe other job-rich communities will try to put their own measures on the ballot,” Mountain View Mayor Lenny Siegel said. “I’ve been talking to council members in a number of other cities. They are interested.”
Palo Alto, Santa Clara, Sunnyvale and Menlo Park are among the cities that the Mountain View mayor believes would like to follow suit with their own employee tax plans.
“These are all job-rich cities, where employment has been growing rapidly, and housing and transportation have not,” Siegel said.
“Other cities will follow suit,” Cupertino Vice Mayor Rod Sinks said. “I would expect that other cities in the West Valley and North Santa Clara County will consider similar measures.”
If those measures become reality in the cities being touted, some of the Bay Area’s highest-profile companies could be affected.
Apple is based in Cupertino; Google and its owner, Alphabet, are in Mountain View; Intel calls Santa Clara home; Facebook is headquartered in Menlo Park; and Twitter is in San Francisco. The proposed Mountain View tax could cost Google $5.4 million a year. It’s not yet clear how much Cupertino’s proposal would cost Apple or other large employers.
A lot of factors point to this being a prime time for efforts such as these. San Francisco ranked fifth worst for traffic congestion in the world — and third worst in the U.S. — last year, according to INRIX Global Congestion Ranking. Record housing prices in 2018 boosted the median price of a single-family home in the Bay Area to a record $893,000 in April, according to a CoreLogic report.
Federal tax cuts also have improved the balance sheets on an array of U.S. companies, large and small. Silicon Valley’s largest tech companies have contributed to the gridlock on freeways and soaring housing costs as they’ve grown rapidly in recent years, with brisk hiring and expansion in unexpected areas and mega-leases that gobble up huge swaths of office space.
Case in point: Facebook signed a lease in March to occupy three Sunnyvale buildings — away from its Menlo Park headquarters, which the social media giant is busy expanding. The Sunnyvale lease totaled just over 1 million square feet — the biggest rental deal in the Bay Area so far this year. Facebook also leased an office tower recently in San Francisco.
As a result, tech companies have become an easy target for those seeking to raise taxes based on how big those corporations are in a particular community. More than a few tech companies rake in multibillion-dollar profits each quarter.
Still, large tech companies may not be the ones that really feel the pinch of higher per-employee taxes.
“When you have a tax on jobs of large employers, it’s often mom-and-pop operations and smaller businesses that feel the biggest impact,” said Carl Guardino, president of the Silicon Valley Leadership Group. “These taxes might discourage startups from starting in those cities or from growing there. It could push big companies out of those cities.”
The leadership group is a public policy trade association representing more than 375 of Silicon Valley’s employers.
San Jose, Northern California’s largest city, has a business licensing fee, but it’s at a much lower rate than what is being contemplated in other Silicon Valley communities. San Jose Mayor Sam Liccardo says he doesn’t like the idea of employee headcount taxes.
“We shouldn’t tax people or jobs,” he said. “What we should do is tax unbalanced development such as we see in jobs-heavy cities that are adding many more employees than housing. That should be a Bay Area-wide tax on development that is unbalanced. Sooner or later a recession will come along and those jobs that cities are taxing will start to look scarce.”