Tax proposal leans heavily on big business

25 largest companies in Mountain View to pay 90 percent of fees

These days, few people are willing to defend Mountain View's current model for its business license, and resident Jimmy Yeung certainly isn't one of them.

Back in May, Yeung launched his business Wagmore, a van set up as a mobile salon for dogs. It's a one-man operation, and he serves as manager, driver and expert dog-groomer. To start his venture, he paid the city's $150 fee for a mobile-vendor license.

On the other side of town, LinkedIn also cuts a check each year to the city for its business license, but the large tech company is charged only $34. Walmart also pays $34, despite being one of the city's largest retailers. Mozilla, Siemens, 23andMe and Synopsys each pay slightly more $104 but still less than a dog-grooming van.

Hearing how little these large firms pay, Yeung said he felt a little shafted. He tried to stay impartial, saying those larger companies were probably paying higher taxes in other ways. But on the other hand, he was a little peeved.

"This is kind of ridiculous. I'm paying $150 a year and I'm not even doing all of my business in Mountain View," he said. "This just doesn't seem fair for me."

To a degree, Mountain View city leaders are on Yeung's side, saying the city's largest firms should be paying the largest share of business license taxes. Under a new plan that will go before voters in November, companies in Mountain View would be charged on a per-employee basis.

In effect, the business-license system now tilted against small businesses would swing like a pendulum the other way, making the city reliant on a handful of tech firms and big-box retailers. The fees are expected to raise an extra $5.9 million per year, and about 90 percent of that money is expected to come from the city's 25 largest companies, according to an analysis by the Voice.

A full breakdown of how much each business will be paying under the new license fee schedule can be found here.

As of last month, Mountain View has just over 3,600 licensed businesses on file. Under the city's new license structure, the city's median price for a license will go from $34 to $95.

In a league of its own with more than 23,000 employees, Google is slated for the largest increase by far if the ballot measure passes. The tech giant has paid just under $10,000 a year for dozens of licenses for its various operations around the city. Under the new fee schedule, the company would pay more than $3.5 million annually.

Looking to one company to pay about two-thirds of the entire fee could be seen as lopsided, and city officials have acknowledged this in multiple meetings on the proposal. In many instances, stakeholders have pointed to Seattle, which recently tried to implement a similar head count fee on Amazon and other big companies. That led to a fierce political opposition campaign from the business community, prompting Seattle leaders to relent. Within about a month, the Seattle City Council voted to repeal its own tax plan.

Dan Kostenbauder, a tax policy expert with the Silicon Valley Leadership Group, believes Mountain View could be making the same mistake by pursuing a similar tax system. He acknowledged that Mountain View's proposal is different in many ways, but it still would force employers to shoulder higher costs based on the number of jobs they create, he said.

That might be bearable now as tech companies are flush with cash, but if an economic downturn comes around, companies will scrutinize Mountain View's fees more closely, he said. It's not a matter of if but when this downturn will arrive, he said.

"It's almost a certainty that (there) will be a down cycle, and companies will look at all the costs of doing business," Kostenbauder said. "If you keep adding more and more costs onto the employers, then it gets to the point where a company makes the decision to move to a nearby city or out of the area."

On the flip side, about 100 smaller companies could end up paying less under the fee structure. This includes Wagmore, Yeung's one-man dog-grooming van, which would be charged $75 under the newly proposed fees. The biggest winners will be dozens of apartment owners in the city who have had to pay higher rates based on the number of homes on site. For example, the 544-unit Americana Apartments is currently charged about $1,100 annually, but that fee would drop to about $200 under the new model.

Any business with less than $5,000 in annual revenue would be exempt from the license fees, but it is unclear how many might fall under that threshold.

As part of the new fee structure, Mountain View's Finance Department is also planning to step up enforcement to ensure companies are accurately reporting their headcount. Up to this point, many business have been routinely underreporting their employee numbers, according to city finance staff. For example, many restaurants claim to have just one employee. The data storage company Pure Storage claims to have only 11 employees in Mountain View despite being listed as one of the city's largest sales tax contributors, according to city records.

Under the new system, the city plans to collect employee numbers reported to the state Employment Development Department, said Finance Director Patty Kong. She expects her department would need to hire extra staff to handle the workload.

Mayor Lenny Siegel, a leading proponent for the new fee model, maintains that it will not stifle local business. Small businesses will be protected, and larger companies can easily carry the higher costs, he said.

"This tax will be a small percentage of the payroll of any company in Mountain View," he said. "We don't believe it will force any business to leave town or close up."

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4 people like this
Posted by A Talking Cat
a resident of Old Mountain View
on Jul 15, 2018 at 5:51 pm

A Talking Cat is a registered user.

*reads article about new fee structure, twice*

So umm… what *is* the new fee structure?

2 people like this
Posted by Alan L.
a resident of Cuernavaca
on Jul 16, 2018 at 9:16 pm

Why not tax everything as a percentage of what their presence costs the City?????

Like this comment
Posted by Steven Nelson
a resident of Cuesta Park
on Jul 21, 2018 at 9:52 am

I find it a bit odd that the tax is allowed to be, what I would call 'super progressive', with the per person rate increasing as the total size of the company increases. "Uniform" tax per employee head seems fairer to me. (but I will vote for this tax). The Special Tax allowed school districts must be "uniform" over property or persons.

It would be lovely for the MVWSD to be first in state - to pass a per person uniform tax (person as resident or person as employee) to support the operations of the schools. Figured at a small "uniform" fraction of this City Tax rate, it could replace the $6M or so that the city still diverts from the schools using the Shoreline District property tax diversion. Fair tax revenues directly to schools - is fair. SUNSET ON SHORELINE!

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