By Khalida Sarwari
Mountain View voters will decide this fall whether Google and other businesses should be slapped with an employee “head tax” to help alleviate the traffic and housing problems that plague Silicon Valley.
The City Council voted unanimously late Tuesday to place a measure on the November ballot asking residents to authorize taxing businesses between $9 and $149 per employee, depending on their size. If the measure passes, the tax could generate upwards of $6 million a year for the city, with $3.3 million coming from Google alone.
But the city’s Chamber of Commerce, which opposed the decision, says it now hopes to persuade a majority of council members to lower the proposed maximum tax rates before settling on the ballot’s language.
The bulk of money raised through the head tax would pay for transit projects, including bicycle and pedestrian enhancements, and 10 percent would go toward providing affordable housing and homeless services.
Jesse Cupp, a Mountain View resident and chair of the city’s Visual Arts Committee, introduced himself to the council as a Google shareholder who favors a “top-heavy” progressive tax.
“Why shouldn’t one company pay the majority of the business tax if they are the one company that strains city resources the most?” he said. “Their impact on housing and traffic is disproportionately large compared to all other companies in the city, and they should cover the cost.”
The council chose to forge ahead with its controversial proposal just weeks after Seattle walked back a similar plan amid fierce opposition from local business titans such as Amazon and Starbucks. Mountain View Mayor Lenny Siegel noted that unlike Seattle’s proposal, which was primarily meant to ease homelessness, this one would benefit not only his city’s residents but also Google’s employees, who face the same transportation and housing challenges.
On Tuesday night, he again reiterated those issues well into a nearly three-hour discussion that culminated with the council’s unanimous vote.
“Our needs for transit are enormous,” he said. “We can’t rely on not only the federal government, but the VTA.”
While Google has stayed quiet on the issue, the Silicon Valley Leadership Group and Mountain View Chamber of Commerce have not. Representatives of both groups spoke against the tax Tuesday.
The Chamber’s Bruce Humphrey pushed for an alternate tax model his organization recently put forward that asks businesses with more than 1,000 workers to pay a flat $100 per employee rate. Some council members, including Vice Mayor Lisa Matichak and Councilman John McAlister, praised the plan’s simplicity, while others, such as Councilwoman Pat Showalter, criticized it for burdening small businesses. Humphrey noted that a benefit of the Chamber’s model is that it doesn’t stick one company with 60 percent of the tax.
The model the council ultimately approved would charge the city’s roughly 3,700 businesses a progressive flat rate based on their size and a progressive per employee rate. Businesses with up to 50 employees would be charged a base rate of up to $75 per year and those with more would be charged a base rate plus a per-employee fee that climbs with the work force’s size, up to a maximum of $150 each at Google, which employs a little more than 23,000.
On Wednesday, Chamber CEO Tony Siress said the business group would push to get a majority of council members to publicly commit to a base rate of $50 or less — to protect the smallest companies.
“This is just a new cost on top of high wages, high rents and all the costs of doing business in the Bay Area,” Siress said.
But Siegel said he doubts the Chamber will garner much support for a lower base rate, which the council had earlier proposed should be $100.
“We lowered it to $75 already, which I saw as a compromise,” Siegel said Wednesday.
During the Tuesday meeting, Councilman Chris Clark recommended that the council fine-tune certain elements of the plan, such as provisions for out-of-town and seasonal businesses, and suggested that the city continue engaging with the Chamber to come up with a mutually satisfactory iteration of the approved plan.
Mountain View’s current business tax has been in place since 1954 and is based on businesses’ square footage, which Siegel has characterized as “anachronistic as well as low.” Councilman Ken Rosenberg said he initially felt uncomfortable approving a tax increase until he realized just how outdated the city’s current rates are.
“We keep couching this as a Google tax, but it’s a business license update,” he said. “Business license fees are $30 and that’s weird. It’s weird because it hasn’t changed in decades. So that seems like a bargain frankly. It doesn’t seem like a tough sell.”
The head tax model already exists in San Jose, Sunnyvale and Redwood City. Cupertino city officials were considering a similar tax until last week, when they suddenly decided to wait and spend more time crafting a viable plan while engaging with the business community. The city plans to pursue the tax again next year.
In a survey of more than 900 likely Mountain View voters, 62 percent supported the head tax. Those who didn’t indicated that businesses should pay their fair share for fixing the problems they helped create.
The tax, to be phased in over two years starting in 2020, requires the approval of a simple majority of voters.
Staff writer Ethan Baron contributed to this story.