Derided by businesses that believe it will drive away jobs from the city and staunchly supported by advocates who say it will bring new money for much-anticipated mass transit and housing projects, the so-called head tax will charge businesses such as Google based on the number of employees they have working in the city.
The new tax — overwhelmingly approved by voters in 2018 — is expected to generate an estimated $6 million a year for a city cash-strapped to deal with hundreds of millions of dollars in transportation and housing needs. Just over half of the head tax revenue — about $3.3 million — will come from the city’s largest employer Google, which is considered by many to have driven up the demand for housing and office space in Mountain View over the past 15 years.
As the new tax takes effect, all eyes are on Mountain View as it is set to become another case study for cities across the country considering similar measures.
Apple’s home of Cupertino is set to again discuss imposing a head tax on employers after shelving such a proposal in 2018. And Palo Alto also is gearing up for a similar conversation after studying Mountain View’s process two weeks ago, with some members of the finance committee urging a council discussion on a head tax this year.
Supporters such as former Mountain View mayor Lenny Siegel believe the tax will give the city the purchasing power it needs to deal with a jobs-housing imbalance that has persisted for several years and to tackle improvements to rail and transit service.
Though he understands why some business owners might oppose the tax, Siegel said the tax was necessary.
“There’s a reason we pursued the tax as opposed to donations,” Siegel said. “Major infrastructure investments usually require bonding, and you can’t bond against donations. The idea is to have a steady flow of revenue to build the infrastructure these companies need to survive.”
Unlike the lengthy battle between Amazon and the city of Seattle, Wash., over a similar head tax that later was repealed amid strong opposition from the tech giant, Siegel said Google was neither privately nor publicly opposed to the tax because he said it understood the underlying problem: more and more Google workers coming to Mountain View and straining existing city services.
Employment at the “Googleplex” has more than doubled in the past decade, from 10,000 workers to more than 23,000, according to city documents. The city’s second largest employer Symantec doesn’t come close to that number, employing just over 2,800 people.
To make sure the tax wouldn’t unduly burden small businesses, then-Mayor Siegel and the council proposed a progressive tax that has enterprises smaller than 50 workers pay a flat rate of $100 to $400 a year.
In addition to a progressive flat rate, the city’s roughly 3,700 businesses will pay a progressive per employee rate. Businesses with up to 50 employees will pay a base rate of up to $75 per year, and those with more would pay the city a base rate on top of a per-employee fee that climbs with the work force’s size, up to a maximum of $150 each at Google.
But Silicon Valley Leadership Group CEO Carl Guardino doesn’t think those safe measures will be enough to keep businesses in Mountain View. He said that “taxing jobs” is not a sustainable policy for the city and has warned officials over the past three years that the tax would drive businesses away or keep existing ones from expanding.
“I think what this does is make the rest of the 90 plus cities in the Bay Area incredibly excited that 4 or 5 have forgotten we shouldn’t take jobs for granted,” Guardino said of cities such as East Palo Alto and San Francisco that also have passed taxes aimed at large companies.
Though 80 percent of the money is ostensibly going toward infrastructure improvements and the rest for housing, Guardino said he and other business leaders don’t know if they can trust Mountain View will keep its word as to how it will spend the money.
“Mountain View intentionally went with a general purpose tax,” Guardino said. “Any given Tuesday night they could change that for any reason. So it is 100% factually incorrect that this tax on jobs is for transportation or for any purpose because the council chose not to go that route.”
Guardino said Mountain View should have come up with a special business tax that would have needed two-thirds support from city voters and required city officials to outline exactly what the money would be going towards. He said when cities are willing to be specific about where the money is going, “we are much more open to taxes.” Voters approved the head tax by 70 percent.
Siegel said a special tax would have restrained the city from using the money as it sees fit.
“You need some flexibility with an important new source of revenue like this,” Siegel said. “What are we going to do, build a stadium? We have clear needs. I mean we might juggle the percentage going for housing rather than transportation. We have a range of things we’ve listed, and this will provide revenue to invest in improved infrastructure at a time when we have limited sources.”
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