Something that might sound like free-market heresy could soon become reality in Mountain View -- taxing employers for creating jobs.
At a late-night meeting Tuesday, City Council members embraced the idea of taxing Mountain View's largest companies, saying it was a reasonable strategy to ease the city's immense traffic burden. The proposed tax would charge companies annually for every Mountain View worker, which is expected to raise about $6.1 million a year -- about half of which would come from Google.
In a unanimous vote, the council supported bringing the headcount tax to voters as a November ballot measure. Although the idea generated some nervousness, council members largely agreed that asking more from the city's large tech employers was an appropriate response to the outsized traffic congestion those companies are causing.
"The reason we have so many people on the freeway is because our companies are hiring, and hiring rapidly," said Mayor Lenny Siegel. "They're externalizing their costs by having the community pay for their transportation improvements and suffering their impacts."
Forcing Google and other tech companies to pay more is largely supported by local voters -- about two-thirds of residents indicated they would vote for it, according to city polling.
Google, which has just over 23,000 employees in Mountain View, has not taken a position on the headcount tax, and its officials declined to comment for this article.
Many city leaders made it clear they believed their action could kick off a new push for Silicon Valley cities to demand more from the tech sector. San Jose, Sunnyvale and Redwood City already have similar fees in place. A similar headcount tax is being considered for the November ballot in Cupertino, although the city rejected that idea back in 2016. This week, Palo Alto council members also expressed interest in a similar tax for a future election.
Fears of a larger trend prompted regional business groups to wave some red flags. At the Mountain View meeting, the Silicon Valley Leadership Group and the Bay Area Council both spoke in opposition, warning that the burden from the new tax would fall heaviest on mid-sized companies.
These concerns were largely dismissed by council members. Pointing to Regional Measure 3, the Bay Area bridge toll increase that was heavily endorsed by the Leadership Group, Siegel wondered aloud if the business group had ever endorsed a tax that wasn't on "the little guy."
Yet council members did raise their own doubts on whether the tax might go too far. The most aggressive plan considered that night would have charged $300 per head for companies with more than 5,000 workers. That proposal would have raised $10 million annually, with $6.6 million of that coming from Google.
The tech giant could easily stomach that fee, but other companies might see that cost as the reason to expand elsewhere, said Councilman Ken Rosenberg.
"It'd be really sad to see companies grow here and then leave the area because Sunnyvale is more business friendly," he said. "If you start throwing expenses at corporations, they might make a different decision (about staying here)."
A small crowd of activists cheered the city on, urging them to seek $13 million or more. For years, Mountain View taxpayers have essentially subsidized Google's expansion as they funded transportation and services needed for the company's workforce, said Meghan Fraley of the group Mountain View Thrive. It was like a restaurant guest ordering the most expensive meal at the table and then ducking into the bathroom when the check arrives, she said.
"We want everyone to pay their fair share," she said. "We're asking for something that can begin to cover the impacts that we're seeing."
Yet city officials warned that drawing too much money from one company could be a risk down the road. The city's revenues from the employee tax would likely be used to float a bond that could raise tens of millions of dollars for a new transit system. The city would be left vulnerable if the bond loan relied on money from one major employer, said Councilman Chris Clark.
"It's not that the company would leave, but if they were to just shift their workforce, that would make bonding a lot harder," he said. "It's important to spread out this burden more."
Figuring out the right system for taxing employers became a difficult dilemma that stretched into the late hours of the June 5 meeting. Council members had their pick of four different plans, two of which were designed by council members.
In the end, they backed a hybrid cobbled together from a pair of tiered tax schedules that were proposed by Clark and Siegel. It's expected to raise $6.1 million per year. Under the tax, Google would pay $150 per employee annually.
Small businesses would not face a per-employee fee; however, the cost for their business licenses would increase. This would cost $100 for businesses with one employee, $200 for two to 25 employees, and $400 for 26 to 50 employees.
Companies that exceed 50 workers would be required to pay a per-employee fee.
If approved by voters, the new tax would take effect in 2020.
The per-employee tax was just one of three tax measures considered by the council on Tuesday night. The council also approved plans for a future tax measure on marijuana sales in the city. The tax could go as high as 9 percent, but members indicated they could lower that amount if it became too restrictive. It is expected to generate $1 million per year.
A third tax proposal to raise the city's fees on hotels and other lodgings did not receive council support.
The council will make a final decision on putting the measure on the November ballot at its June 26 meeting.