City set to launch new headcount tax

In the coming weeks, Mountain View leaders will roll out a new business tax that could eventually net $6 million or more per year from the city’s largest employers.

Starting in January, the city will begin charging companies big and small a new fee based on their total headcount of employees. The tax was specifically designed to extract more revenue for public services from the city’s largest tech companies to offset the traffic and housing demands that they create.

The new business tax will be gradually phased in over the next three years to allow larger businesses to adapt to the new fee structure. Large employers with 50 or more workers will be required to pay one-third of their license fees next year, and then two-thirds in 2021. The full tax will be implemented in 2022.

A graphic showing how the tax would affect each business can be found here.

Over recent months, officials in the city’s Finance Department have sent out notices of the new fees to about 5,000 businesses registered with the city. Staff have been fielding questions from business owners, but overall there doesn’t seem to be any major problems with the new fee regime, said Finance Director Jesse Takahashi. The new fees will be due at the start of January.

“There’s been quite a variety of responses,” Takahaski said. “Most are trying to understand how this will work and how it’s different from the previous system. But overall it seems like folks are accepting it.”

The new business tax operates on a tiered system that charges a higher per-employee fee based on the size of the company. For example, Trader Joe’s with 63 workers would pay up to $75 per employee. Pure Storage and its 1,150-person workforce would pay a maximum of $100 per employee.

Small businesses with annual revenues of less than $5,000 would be exempt under the new city business tax, as would any business owned by a military veteran as the sole proprietor.

As Mountain View’s largest employer by far, Google stands to pay the most under the new fee structure. The tech giant reportedly has more than 23,000 employees in Mountain View, which would require the company to pay about $3.5 million annually.

Mountain View’s experiment in taxing its large tech employers is expected to be closely watched by other cities. Seattle, Cupertino and East Palo Alto each proposed similar plans to tax large businesses last year, but local officials decided to take a wait-and-see approach.

In Cupertino, officials last year held off on a similar per-employee tax that would have had a lopsided impact on Apple. Instead, Cupertino officials decided to directly negotiate with Apple on greater corporate contributions to the community. Earlier this year, Apple proposed funding about $10 million for a series of bike paths, and Cupertino officials indicated they didn’t need to press for more.

In Mountain View, the revenue from the new business tax is expected to be used mainly for transportation improvements, with some left over for to fund affordable housing or other projects.