PALO ALTO — As cities throughout the Bay Space search to reap the advantages of Silicon Valley’s strong financial system, Palo Alto may quickly turn into the newest to levy a enterprise tax aimed toward tapping firm pockets.
From Tesla to Varian Medical Techniques and SAP SE, Palo Alto’s billion-dollar firms — in addition to its much less profitable ones — could have to start out paying taxes on their workplace areas to assist finance metropolis companies and tackle their impacts on housing and transportation.
For years town has flirted with a tax on companies, however has backed off every time — as soon as in 2008 proper earlier than the financial recession, then in 2016 and once more in 2020 amid the coronavirus pandemic. To today, Palo Alto stays the one main Bay Space metropolis and not using a enterprise tax.
Within the coming weeks, Metropolis Council members will likely be reviewing a employees proposal to put a sq. footage tax on the November poll. In line with the proposal, the tax would apply to workplaces bigger than 5,000 sq. ft. Workplaces smaller than that might pay a flat $50 annual price and people bigger would pay both 5, 10 or 20 cents per sq. foot, relying on which possibility the council chooses.
On Monday, the council’s finance committee suggest that the total council transfer forward with a poll measure. A metropolis report notes that regardless of the pandemic, Palo Altans really feel a tax on companies is overdue and a majority of voters would assist it.
Mayor Pat Burt stated a majority of town’s management has additionally indicated it helps the tax measure, which might assist town pay for future reasonably priced housing initiatives, rail-grade separations required underneath Caltrain’s electrification plan and restoration of metropolis companies reduce through the pandemic.
The tax could be a boon for Palo Alto. In line with a metropolis report, a 20-cent tax per sq. foot may herald as much as $43.4 million a yr.
“It’s very seemingly we’ll get one thing within the November poll,” Burt stated. “It seems there may be good assist on the council and locally.”
Burt stated he pushed to have a per-employee tax measure go on the 2016 poll however the council balked after fretting that it may harm companies and jeopardize countywide transportation Measure A.
This go-around Burt is assured the measure will seem on the poll. He stated it’s modeled largely after East Palo Alto’s tax on workplace sq. footage, specializing in bigger workplaces whereas exempting small and community-serving companies.
Leasing an workplace in Palo Alto is pricey — almost twice as a lot as in San Jose, Burt stated. The place in San Jose an organization can discover workplace area for about $4 a sq. foot, in Palo Alto it’s nearer to $8 a sq. foot.
Burt stated that regardless of the entire “unbelievable enterprise wealth,” Silicon Valley has a number of the lowest company taxes within the nation, a actuality many different cities have sought to vary lately.
Mountain View tailor-made its headcount enterprise tax to Google, by far its largest and most worthwhile employer. And San Francisco has a menu of enterprise taxes, together with a gross receipts tax, business lease and business emptiness tax, in addition to taxes aimed toward overpaid executives, administrative workplaces and hashish companies, and a gross receipts tax tailor-made to addressing town’s rampant homelessness.
Whereas Palo Alto doesn’t have an organization as huge as Google or Fb, council members are nonetheless anticipating high employers to pay for what makes town so enticing to spend money on — its companies, tradition and legacy of tech entrepreneurship.
“The rationale we don’t have the large tech firms is that they outgrew us,” Burt stated. “Frankly Palo Alto actually desires to be the middle for brand spanking new firms to proceed to be born and develop to a sure level. Some keep for a very long time and others transfer away. However we at the moment have loads of massive firms that may afford to pay extra.”
Nonetheless, detractors just like the Silicon Valley Management Group have warned Palo Alto that inserting a tax on huge firms may exacerbate the exodus of tech firms.
The group, headed by Silicon Valley enterprise leaders, has lengthy been against a enterprise tax, as a substitute favoring gross sales tax will increase.
“The Silicon Valley Management Group and our members are involved that the proposed new tax may make Palo Alto a lot much less enticing as a spot to do enterprise,” management group spokeswoman Laura Wilkinson stated in an announcement. “Make no mistake, this proposed new enterprise tax would harm small companies in addition to the big ones.”
Whereas town has spent loads of money and time on polling, “it has did not do an financial evaluation to know the total financial impression of an enormous new tax that's a lot larger than in neighboring cities,” Wilkinson stated.
Councilman Eric Filseth pushed again on the concept that the tax will scare away companies.
“The Silicon Valley enterprise mannequin has been to headhunt the nation’s, and the world’s, tech expertise and produce it right here to invent the longer term,” Filseth stated. “We now have been fabulously profitable with this, and created virtually unimaginable quantities of wealth within the course of. But now we have not reinvested sufficient of that wealth within the housing, transportation and social-services infrastructure wanted to assist that enterprise mannequin in the long run, and the outcomes are what we see.
“Within the excessive, this can choke off the area’s future – we already see the indicators,” Filseth added.