How are two lobbying powerhouses able to foretell the impact of a yet-to-be-defined tax measure in Palo Alto? Through a wrinkle in time, the Silicon Valley Leadership Group (SVLG) and the Commercial Real Estate Development Association (NAIOP) opposed the business license tax before it was even defined. NAIOP and SVLG — whose tax-aversion somehow never extends to personal taxes like bridge tolls and parcel assessments — have already flooded our mailboxes and Facebook feeds over it.
A tax on large corporations makes good sense. Why? The region, especially tech and real estate, has prospered spectacularly. According to Joint Venture Silicon Valley, the corporate wealth of Silicon Valley and San Francisco is $14 trillion. By comparison, personal wealth in the area is one-twentieth of that, around $750 billion.
Meanwhile, the Bay Area's unmet needs for public safety, 30,000 unhoused residents and transportation improvements run into the hundreds of billions of dollars. Between taxing corporations or personal wealth, only one source, corporate wealth, has that kind of money.
Where does SVLG stand on taxing large businesses? Well, according to its mailer: "Now's not the right time" (When is?); "It's too big" (The size isn't determined yet); "It'll hurt small businesses" (Small business will certainly be exempted); and "It should benefit businesses" (It should benefit everybody).
Business license taxes are the norm in the Bay Area; Palo Alto is one of the few cities currently without one. Public outreach has been underway since 2015 in the form of public meetings, polls and focus groups. Through these efforts, we have listened and prioritized the values of fairness and ease of enforcement. Polls have shown broad support for a modest contribution by corporations to Palo Alto coffers.
Three critical areas have been identified as underfunded to meet our current and projected needs:
First, restoring and improving city services, notably public safety. For the last two decades the police and fire departments have accounted for about 35% of the city's budget. However, during that time, staffing for both areas fell steadily, down 30% since 2004. Those who live and work in Palo Alto have experienced the erosion, such as reduced traffic enforcement and recent fire station "brownouts."
Yet we also face expanded needs, notably around mental health response, and the growth of organized property-crime tourism. We can't deliver on these things if we continue balancing our books via cuts. All of us, residents, businesses and visitors, rely on public safety services.
Second, we have major transportation work ahead. Separating car, bike and pedestrian traffic from our railway crossings, both to increase safety at some of the state's deadliest crossings and to protect us from looming major transportation-capacity problems, is finally feasible with county and federal funds. But it will require local contributions that a business tax can provide.
Third, we need more services for the unhoused and families without large tech salaries to keep them afloat. Rapid high-wage job growth in Peninsula cities has increased inequality and shrunk the housing stock available for lower-paid workers. Silicon Valley corporations lead the planet in wealth creation, but community investment has fallen short. The need for housing for service workers, those on fixed incomes, and the humanitarian needs of the rising number of people living on sidewalks, in campers, in parks and creeks has grown beyond the ability of tax-paying residents to fund.
The nature of business has changed, and Palo Alto must pivot. Historically, companies made products that generated sales tax for city services. Now, many of our largest corporations generate very little sales tax because their business is information, finance or professional services. Our hotel and sales taxes plummeted during the pandemic. Diversifying our revenue base will make us more resilient for the long term.
No solution is perfect, but we are striving to define an equitable and appropriate business tax to best serve the Palo Alto community.
Our region will be a very different place if it can't sustain communities where workers prefer to live and be, even though the Bay Area is more expensive than elsewhere. Here in Palo Alto we can do our part by adopting a fair, appropriate tax on those companies that can most afford it. Silicon Valley is the corporate envy of the world, but as the saying goes, "The piper must be paid."
We don't need crystal balls, time travel or misinformation. We must take responsibility now and solve these threats to public safety, infrastructure and our most vulnerable neighbors with a financially sound solution for our long-term community health.