News

Council backs employee tax that would cost Google millions

Majority supports $150 annual fee on workers at large companies

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.

Comments

98 people like this
Posted by Tony Siress
a resident of Shoreline West
on Jun 7, 2018 at 11:42 am

Hi, I sat through the entire process, it is important to note that the proposal adopted by City Council has what I believe to be a very unfair fixed rate for our smallest employers. A company with 2 employees pays the same as a company with 25, or 2 employees = $100/employee 25 employees = $8/employee. If this is not screwing the small guy I don't know what is? FYI we have over 3000 companies with 1-2 employees in Mountain View.


9 people like this
Posted by do the math
a resident of another community
on Jun 7, 2018 at 11:58 am

so the "tax" will be $150/person. I'd guess the average fully loaded cost of a Google (or pick any other large tech company in the area) has fully loaded cost per employee (compensation plus benefits) of more than $225,000/year so this will increase the average cost per employee by ~0.07%, I'd be surprised if that was the deciding factor leading any company to expand elsewhere......


13 people like this
Posted by Mark Noack
a resident of Old Mountain View
on Jun 7, 2018 at 12:38 pm

Mark Noack is a registered user.

Hi folks,

Nothing is simple about this business license tax proposal, and Tony Siress is correct that I missed something pretty important in my initial story.

I forgot to mention that smaller businesses with fewer than 50 workers would face a fee increase, although they wouldn't be paying the per-employee tax. The annual business license fee for those employers would be increased as follows:

$100 for 1 employee
$200 for 2 - 25 employees
$400 for 26 to 50 employees.

Most businesses are currently paying $34 per year for their licenses.

Sorry about any confusion this may have caused!


9 people like this
Posted by Robyn
a resident of another community
on Jun 7, 2018 at 2:32 pm

Remind me... how this will benefit residents?


92 people like this
Posted by Bite the Hands that Feed you
a resident of Old Mountain View
on Jun 7, 2018 at 2:55 pm

It's really strange that Mayor Siegel has elected to not disclose the tax revenues of the large employers in Mountain View. Collectively the top 10 represent in excess of $130M/year in tax revenues to the City of Mountain View. (all public information) This is nothing more than a re-election ploy that will most likely backfire. His proposal of flat fees for small companies is even worse, charging a company with 1-2 employees $100/person is the worst example of a regressive tax if I ever saw one. This entire thing was Lenny's idea and his screw the big guy will most likely screw the small guy. He is one of the biggest beneficiaries. if anyone is externalizing costs it is him. He lives in one of the most expensive neighborhoods in Mountain View and pays the lowest taxes. So who is really not paying their fair share...


9 people like this
Posted by YIMBY
a resident of Another Mountain View Neighborhood
on Jun 7, 2018 at 3:44 pm

@Robyn

Because retired people who no longer depend on a paycheck or a good economy, who's days are spent staying at home, looking out their window, and complaining about the height of buildings, look at Google as an unwanted force of change, so anything that negatively impacts them is a good thing.


9 people like this
Posted by @Robyn
a resident of Old Mountain View
on Jun 7, 2018 at 3:52 pm

@Robyn - this tax benefits residents if the money is used to repair the damage to our infrastructure that is caused by these big employers, especially city streets


2 people like this
Posted by Maher
a resident of Martens-Carmelita
on Jun 7, 2018 at 4:18 pm

PLEASE someone tell the accurate truth about how many $ companies of different sizes must pay for each employee. Is it the same head tax for each employee no matter how many employees a company has? or does the head tax vary.

The info is so confusing and I think the big companies i.e. Google etal, should bear the brunt of the tax program and small companies should be given a more lenient segment of the burden. A pro rata approach of diminishing costs vav small, independent sole proprietor businesses needs to be part of the tax structure.


121 people like this
Posted by small business owner
a resident of Blossom Valley
on Jun 7, 2018 at 4:29 pm

The small business fee is proposed to increase over 300% from what I currently pay. I would seriously consider going out of business in 2020.


3 people like this
Posted by But what bactual number?
a resident of Another Mountain View Neighborhood
on Jun 7, 2018 at 5:21 pm

A 300% increase could be going from 1 dollar to 4 dollars.
How much is it really?


136 people like this
Posted by Bill
a resident of Rex Manor
on Jun 7, 2018 at 6:12 pm

Well, another tax for ALL business to absorb. When will it end? When more people leave than stay? Mountain View is now very anti business friendly. So, it raise the price of goods and services more for everybody... Mountain View should be ashamed of themselves. When did excessive taxes help in long run... so that Rome fell so will others that do the same.


13 people like this
Posted by Lenny Siegel
a resident of Old Mountain View
on Jun 7, 2018 at 6:34 pm

Lenny Siegel is a registered user.

The detailed chart of the proposed tax may be found at Web Link

These numbers were developed at public meetings of a Council subcommittee and finalized, in compromise, with participation of the entire Council on June 5.


18 people like this
Posted by @ Comrade Lenny doing fine job
a resident of Another Mountain View Neighborhood
on Jun 7, 2018 at 7:53 pm

Lenny had 2 goals the first year as a council member.
1-was to get rent control.
2-was to get a head tax on Google.

Lenny asked a reporter from the Voice to contact the New York Times, to do a story on the effects of gentrification that Google is causing in the city, increased traffic and higher rents. How do I know this, because the reporter sent out from the San Francisco office of the NYT, he and I had a very interesting talk how all this came about.

I will tell you another secret, Lenny can not stand the train horns, he hears them from his house. He devised a plan he could sell to the council members and the city by calling it a transit hub. What a great way to get the Castro Street train crossing closed and then there would be no more trains blowing their horns as they drive by Castro St. and Lenny will no longer hear them from his house.

[Portion removed due to disrespectful comment or offensive language]


13 people like this
Posted by @Lenny
a resident of Another Mountain View Neighborhood
on Jun 7, 2018 at 8:01 pm

Tell us, why does the city need more money? Give us specifics, not big words like CIP's and such, give us specifics.


4 people like this
Posted by Alan L.
a resident of Cuernavaca
on Jun 7, 2018 at 9:33 pm

Actually, the tax, if aiming to redress the messed up traffic situation, should not be per employee. It should be per car. Does an employee going to work on his skateboard, or bicycle, or walking cause the community the same problems? If we can have stickers to allow single person driving in a commuter lane, we can have stickers on cars parked in certain high employee density areas. (Including private garages)with hefty fines for unstickered cars. Should car poolers pay two to eight times as much for their similar traffic demands as single occupant drivers? How about Google's buses? Give the matter some rational thought folks, not knee jerk solutions.


7 people like this
Posted by Rock Street Resident - We don't even get a neighborhood name! :(
a resident of Another Mountain View Neighborhood
on Jun 7, 2018 at 10:18 pm

I'm concerned about this. I filled out the survey, as they were asking for input from residents, wondering how much we would support this tax. I cannot be the only one concerned about all the independent, smaller businesses. This is what concerns me:

"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."

This "50" cap on employees affect many small businesses... like restaurants, cafes, etc. I don't think that's fair to the restaurants that are working hard to provide a service for us. Rent is already ridiculous. And many companies already offer their employees free breakfasts, lunches, and dinners... taking away business from local restaurants. And why would you need to increase their business license fees? What's the point? You'll already be receiving millions from the larger companies (if this passes). And many small businesses are already gone... their properties sold for redevelopment. This tax, needs to be relooked at and changed. Up the headcount to 100. Don't raise the business license fee, and if you do... not that much! It's been pointed out that the business license fee is currently around $34. That's a significant increase, especially on a small business that's trying to get its feet off the ground. :( Come on now... support your local community and local, independent businesses!!!


19 people like this
Posted by Resident
a resident of Stierlin Estates
on Jun 7, 2018 at 10:43 pm

Yes, Lenny is at it again, tax and more tax, this time get more from businesses. He forgets that they can leave and by the way does anyone really know how many employees Google has in Mtn View. California politicians haven't seen a tax they don't like, when will it end.
And we can thank him also for wanting to close Castro Street at the railroad crossing so he can sleep quietly. And now the next great idea, no more left turn out of downtown onto Central.


7 people like this
Posted by SRB
a resident of St. Francis Acres
on Jun 8, 2018 at 4:16 am

SRB is a registered user.

For context, a few data points that seem missing from this article.

This is not a new tax, there has been a business tax since 1954.

The current business license already has a headcount component for Manufacturers and R&D (source: Web Link) .... with Google paying only $70 more than a sole proprietorship business with no employee.

The current $30 base fee has not changed since 1954. Adjusted for national inflation it would be over $270 in 2018 (source: Web Link).

In contrast, the new proposed base fee ($100) is adjusted for only a fraction of that and the smallest businesses (generating less than $5K in gross revenue) are exempt.

Quite rich to read the quotes from Silicon Valley Leadership Group and Bay Area Council; two groups who peddled Regional Measure 3 -$1,000/year more in tolls for commuters many of whom can not afford to live anywhere close to Mountain View-. When it comes to taxes, these groups seem very NIMBY - No (Tax) In My (Corporate) Back Yard-




2 people like this
Posted by Jes' Sayin'
a resident of Another Mountain View Neighborhood
on Jun 8, 2018 at 12:03 pm

How are they proposing to know the number of employees? Companies don't tell and can easily not disclose everything. Did they even think about that?


1 person likes this
Posted by Steven Nelson
a resident of Cuesta Park
on Jun 9, 2018 at 1:03 pm

Steven Nelson is a registered user.

Thanks @SRB. Numbers are useful when talking about revenues (taxes), profits, and expenses (budgets etc.).

@small business owner. Yes, it is time to close up shop! If you are facing a staggering "300% increase", totaling $66, and cannot figure out how to pay it from future profits? You should close down shop. Really - you must be contributing so little to the GDP, that it doesn't matter.

[the maths $34->$100 is 294%, $34->$200 is 588%, $34->$400 is 1,176% ]

@do the math, I also appreciate your estimate of 0.07% per employee. "Number Sense" as it is called in school.


Sorry, but further commenting on this topic has been closed.

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