A new headcount tax aimed at the city's high-profile tech companies will go before voters this November. In a heated Tuesday night meeting, the City Council unanimously backed plans for a top-heavy tax increase that would raise about $5.9 million each year if approved -- with Google alone paying more than half that amount.
What some are calling the "Google tax" is Mountain View's strategy for funding a suite of transportation improvements, especially an ambitious goal to build a new automated transit system. Given that tech employers are causing much of the area's traffic, council members say it is appropriate for those companies to carry most of the costs of the new business license tax.
For that concept there was widespread agreement, but the finer details of crafting a tax structure led to a painfully long debate during the council's final meeting before a summer recess.
In the end, the council endorsed a tiered tax system similar to what they approved in past meetings. This tax system would charge a headcount fee that would increase with the size of the business. As an example on the lower end, Trader Joe's with its 63 employees would pay up to $75 for each worker. Meanwhile, Google -- by far the city's largest employer with its 23,000-person workforce -- would pay up to $150 per employee.
All businesses with two or more workers would pay a per-employee fee. The cost for most business licenses would also increase from the current price of $34. The flat fee for licenses would now cost $75. Businesses earning less than $5,000 in annual revenues would be exempt.
Despite having the most at stake, Google has been officially silent on the proposed tax increase. In private conversations with Google officials, elected leaders say the company's representatives haven't signaled any major opposition to the proposal, yet the company hasn't taken any formal position. The company has declined to comment on the tax to the Voice.
Nevertheless, the tech giant seemed to have no shortage of proxy defenders on Tuesday night. Business representatives from organizations including the Silicon Valley Leadership Group and the Mountain View Chamber of Commerce made a last-ditch effort to urge city leaders to exercise restraint on the tax plan.
Chamber of Commerce CEO Bruce Humphrey presented an alternative plan to lower the proposed tax on the city's largest employers to $90 per employee while forcing smaller businesses to also pay a higher per-worker fee.
The plan baffled council members, and they pointed out it would dramatically increase the cost burden on small businesses with less than 50 employees. Councilman Ken Rosenberg, who previously served as the chamber's board chairman, didn't hide his irritation that the business group seemed to be going against the interest of its smaller members.
"The chamber board is (putting forward) a model that your membership won't support," he said. "I'm a chamber member, and I would be outraged at this model."
Humphrey repeatedly explained he was working under the guidelines made by his board of directors. Google's government affairs director, Javier Gonzales, is one of about 19 regular members of the board.
"This spreads the tax burden out among all businesses and it doesn't rely on one business to carry 60 percent of the burden," Humphrey explained. "We understand that for some small and medium-sized businesses, this tax is larger."
That viewpoint elicited some support on the council. Councilwoman Lisa Matichak embraced the chamber's plan, explaining that the business group's support was vital for the city to maintain. She described the council's preferred plan as "rushed" -- although city staff pointed out there have been 20 public meetings so far on it.
Echoing similar concerns, Councilwoman Margaret Abe-Koga warned that Mountain View was taking risks if it relied too much on Google as a tax source.
"It might be Google today, but who knows who it's going to be in five to 10 years?" she said. "We need to try and come up with a model that doesn't hit one group really hard."
City officials pointed out that the tax measure's language gives them discretion to potentially lower the business license fees in future years, in the event of an economic recession, for example. If approved by voters, the measure would be phased in over the next three years.
"We won't be cramming this down anyone's throat," said Councilman Chris Clark. "When it's a boom time, perhaps there's a higher phase-in, and during recessions, we can scale this back."
The business license tax maintains significant support, with about 62 percent of Mountain View voters indicating they would vote for it, according to new polling data by the firm FM3 Research. Right now, the measure would need a simple majority to pass, but that could change.
City Manager Dan Rich warned the city business tax could be impeded by a statewide ballot initiative that would force all local tax measures to have at least a two-thirds majority to pass. This measure was being sponsored by the American Beverage Association as a way to counter the push by many cities to enact soda taxes.
On Thursday, the soda industry abruptly dropped their ballot initiative, after state lawmakers signed a moratorium barring local government agencies from enacting new soda taxes.
In a final batch of tweaks to the tax measure, the council stipulated special rules that would allow companies with remote or seasonal workers to basically prorate their business license fees.
The tax measure was approved for the ballot in a unanimous vote. The council also approved plans for a November tax ballot 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. If approved it would generate $1 million per year.
Correction: An earlier version of this story misstated some of the cost tiers for the tax increase