The Santa Clara County Board of Supervisors will not place a sales tax measure on the November ballot this year, after two supervisors on Tuesday pushed back on the idea of taxing residents to backfill the county's budget during the coronavirus pandemic.
Supervisors voted 3-2 to put the five-eighths percent sales tax measure on the ballot at the Aug. 4 meeting, falling short of the supermajority needed to approve a general use tax, with supervisors Joe Simitian and Mike Wasserman opposed. Both worried that the county already has a high tax rate, and a sales tax measure would be regressive and disproportionately affect residents who can least afford it.
"There is just a limit to how much we can appropriately pile up on them," Simitian said.
Originally proposed by Supervisor Cindy Chavez, the sales tax would have generated an estimated $250 million each year for five years. County officials say the money would be much-needed relief to offset massive deficits through 2025, ranging between $383 million and $428 million each year, and would help to pay for the county's public health response to the virus.
The money would at least be partially used to help pay for COVID-19 testing and contact tracing, emergency services, child care and rental assistance, according to a county staff report, though supervisors have broad discretion on how to use general tax revenue. During the recovery, the proceeds could also be used to invest in small businesses and employment for those who have been hit hard by the pandemic.
The coronavirus has been a one-two punch to Santa Clara County's budget, with spending going up and revenue dropping at the same time. The public health crisis has caused a retraction in economic activity across the Bay Area and the state, reducing revenue by hundreds of millions of dollars, and county officials say they have spent over $165 million on the COVID-19 response so far. It's still unclear how much of that spending will be reimbursed through state and federal emergency relief.
Supervisor Dave Cortese said he supported the sales tax, calling it one of the few ways they can provide relief during an economic meltdown worse than the Great Recession in 2008. He said he doesn't want to face members of the community, particularly the safety net population, and think that he failed to take action when it was needed most.
"I feel like we need to do something, because we know what's coming," Cortese said. "It will be very difficult to effectively do it later."
Numerous county nonprofit leaders urged supervisors to put the measure on the ballot and let voters decide whether to pass the sales tax. Similar letters from the Children's Health Council, Community Solutions and the Asian Americans for Community Involvement all praised the county's public health response to COVID-19, but said the "unprecedented" impact on health, economic security and emotional well-being will be a serious problem if the county is out of money.
"I don't really like sales taxes, but we don't have a lot of choices," said Steve Eckert, CEO of Alum Rock Counseling Center. "These extraordinary times cause us to consider every measure possible."
But Simitian, a vocal opponent of sales tax measures in recent years, said he couldn't support the proposal. He worried that, because it was a general tax, there would be no guarantee that the tax revenue would fund important COVID-19 relief programs. What's more, he said it's a hard case to make to voters that the county needs more of their money when the county's budget has ballooned by 84% over a period of seven years.
Santa Clara County residents already pay a total of 9% in sales tax, the majority of which is imposed by the state (7.25%), followed by the Valley Transportation Authority (1.625%) and the county (0.125%). Tacking on the proposed five-eighths cent sales tax would boost the tax rate to 9.625%, putting it well above any other city or county in the Bay Area. Santa Clara County even needed special legislation from the state, passed in 2017, to go above and beyond 9% sales tax.
"We are already at the top of the charts in terms of tax burden with sales tax," Simitian said. "The whole reason there was special legislation in 2017 that gave our county and another the ability to go over and above was because we were maxed out."
Wasserman opposed the measure, saying he believes it would add an additional tax burden to all residents, including business owners and their employees. He said the county needs to do what many of its own residents have done during the coronavirus pandemic and cut back on spending.
"Right now businesses and families and employees are having to make very tough choices with the dollars they have," Wasserman said. "The county is now going to have to make very tough choices with the dollars we have. It's only fair."
One alternative proposed at the meeting was to place a "special" tax measure on the November ballot that would also raise the sales tax rate by five-eighths of a percent for five years, but would require the tax revenue be spent specifically for COVID-19 purposes. The measure would only require approval by three supervisors to make it on the ballot, circumventing the locked 3-2 vote by supervisors.
Trouble is, special tax measures have a much higher threshold to pass, and would require two-thirds majority support from voters in November. Chavez said the polling data shows it would be difficult to meet that threshold, and that she doesn't see a way to push it over the two-thirds majority. The idea was rejected without a vote.