A little-known secret is that Silicon Valley companies currently pay exceptionally low business taxes, less than 5% of what employers pay in San Francisco. And we are among the only cities in the region with no business tax at all. Nevertheless, the Silicon Valley Leadership Group and the Palo Alto Chamber of Commerce are leading well-funded opposition to a tax, making a series of claims against each and every business tax proposed while continuing to support regressive sales, gas and bridge toll taxes that make residents and lower income workers subsidize big tech companies and developers. Santa Clara County Assessor Larry Stone recently said, "Tech companies are not doing enough to mitigate traffic and housing cost impacts. It's going to kill us."
Let's review some of the claims ginned up by the business groups.
It's a problem in search of a need.
The problems are clear — worsening traffic, unaffordable housing and the need to build train separations.
Moderate- and low-income workers, essential for a balanced society and economy, are being displaced, and transportation improvements keep falling behind the impacts of business growth.
Affordable housing projects leverage city funds to get state, federal and donor funding, but current city housing funds are essentially depleted after the recent successful preservation of Buena Vista Mobile Home Park and contributions to the upcoming Wilton Court project. This deficit has been compounded by the council's decision in 2017 to roll back affordable-housing impact fees on commercial development.
Since 2015, the city has piloted a transportation management association (TMA), which is a nonprofit partnership to reduce commuter single-occupancy car trips by 30%. It has worked on a pilot basis downtown by providing discounted bus or rail passes or carpool apps for modest income workers. If scaled throughout the downtown and citywide, this program can actually reduce traffic, parking demand and CO2 emissions. However, it lacks adequate funding. To date, funding has come primarily from the city budget rather than the business community. The business tax can fund this program along with expanding our city shuttle system.
Lastly, the city's biggest traffic congestion happens at the train tracks. The city is approaching decisions on how to separate cars, bicyclists and pedestrians from trains, especially since Caltrain will soon increase the number of trains. Without train separations, we will face near gridlock at our current crossings. These sorts of projects always require a combination of financial resources. In 2016, county voters passed Measure B, a sales tax increase for transportation that included a big down payment of around $300 million for train separations in Palo Alto. But, even for the least costly alternatives, the city needs significant local dollars as leverage to obtain state funds.
Absent a big change in tackling these challenges, the livability and future prosperity of our region are simply not sustainable, harming the very economy the business groups claim to protect.
We'd drive away business.
On average, Palo Alto businesses pay $8/square foot per month, twice the lease rates in nearby San Jose, yet Palo Alto has comparable occupancy rates. The tax rate the city is considering is only around 1/50th the premium employers are currently paying in rent per employee. To the extent the tax even enters business location decisions, the market will limit property owners to slightly smaller rent increases.
In addition, business taxes routinely provide exemptions or discounts to protect small retailers, the hospitality industry and small businesses. Critically, small businesses will benefit from big business paying for better transit, less congestion and more affordable housing for their workers.
Striking comparisons are found in East Palo Alto and San Francisco. In 2018, East Palo Alto passed a significant business tax on larger offices. Rather than stifling growth as opponents claimed, major new development followed the new tax. San Francisco has a series of business taxes that charge more than 20 times the average rates in Silicon Valley, yet it remains overwhelmed by growth. Despite its affluence, Silicon Valley is an exceptionally low business-tax region.
Chris Thornberg, founder of Beacon Economics, said, "Taxes don't have a lot of impact on business decisions. It's something that has been exaggerated for years."
Business groups have thrown up a word salad of arguments against each and every form of business tax. And yet they have not come forward with cooperative solutions to the primary issues facing our community, for which they both share responsibility and will benefit from solutions.
The council must yet decide the tax scale, what exemptions or discounts to allow certain businesses, whether to charge per employee or per square foot, and how the dollars will be used. We hope that the community engages on these issues.
The bottom line is that if businesses want to continue to thrive in our region, they need to accept their responsibilities to pay their fair share to mitigate the impacts they have created and which to this point have been borne disproportionately by residents.
This story contains 916 words.
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