Santa Clara’s corporate tax reform that could help the city address its budget gap appears to be on the way to victory in the election.
Nearly 60% of Santa Clara voters support Measure H in early voting returns, according to the Santa Clara County Clerk of Voters. About 62% of the expected votes across the province have been counted as of Friday evening.
When implemented, the measure will fix Santa Clara’s corporate tax rate so that larger companies pay more than smaller ones. While the tax currently costs businesses anywhere from $15 to $500 per year based on the number of employees, the new “headcount” tax will cost businesses $45 per employees up to $350,000 per year. The cap can increase by a maximum of 5% per year, based on the rate of inflation.
Any Santa Clara business that makes less than $5,000 a year is exempt. The city plans to set aside $330,000 a year to provide tax breaks to small business owners who can prove they will cause a hardship.
Santa Clara officials say the revised tax will increase the city’s long-term revenue and income, and help the city address a $27 million budget shortfall in the short time.
“I’m very happy that this is going through and I’m proud to champion this through 2019,” council member Raj Chahal told the San José Spotlight.
The measure requires major companies headquartered in the city, such as Nvidia, Intel and Applied Materials, to pay more than their fair share, and could bring in about $6 million each. years in the city treasury.
By comparison, the existing business tax model — last updated in 1992 — brings in about $900,000 a year. It requires large businesses with 5,000 or more employees to pay only $500 a year, while businesses with 50 employees must pay $100-$380 a year, depending on the type of business.
Silicon Valley Central Chamber of Commerce President Christian Malesic said the business advocacy group was disappointed the measure would be approved.
“In a blink of an eye, the city council and unfortunately the voters moved Santa Clara from the brightest and best city for business in the valley to the real Bay Area. , to one of the worst cities, at least from a commercial point of view. ,” Malesic told San José Spotlight.
From the beginning, the assembly opposed the change in the tax model. Malesic said room was open to support a modest increase in the current business tax to help rebuild it, but the city has gone too far, trying to make up for lost ground.
“In trying to get a little extra money, or in this case there is a lot of risk from a bigger company,” said Malesic. “And only time will tell if it turns out to be a blip and companies just take it, or if we start to see results from it.”
Last summer, the Santa Clara City Council voted 5-2 to put the measure up for voters to decide. Mayor Lisa Gillmor and council member Kathy Watanabe opposed it, while Chahal and council members Anthony Becker, Kevin Park, Suds Jain and Karen Hardy supported it.
Gillmor did not respond to a request for comment. He previously said he thought the measure would take corporate taxes from “zero to brutal” in too short a time, and hurt businesses.
Chahal said he has met with representatives from Intel, Nvidia, and Applied Materials, and is confident that they are not concerned about corporate taxes, especially since they have annual caps. He said that it is not practical for large companies with thousands of employees to eliminate their work from taxation.
“Take Nvidia or Intel for example. They have multi-million dollar homes here. What does $350,000 mean to them? It’s just one executive salary,” Chahal said. “They told me directly that they are not moving anywhere.”
As of Friday, Applied Materials, Nvidia and Intel have a combined profit of about $600 billion.
Chahal said the companies are also willing to accept the tax because it saves Santa Clara millions of dollars a year in electricity. Silicon Valley Power, the city’s electricity supplier, is much cheaper than other companies, Chahal said.
Malesic said the city is publicly targeting its largest businesses, and the added tax burden could make business leaders reconsider whether they should stay in Santa Clara.
“The real problem here is that for 30 years, the various city councils have done nothing. Therefore, the new city council is trying to achieve 30 years of promotion (with everyone)”, he said.
Contact Joseph Geha at [email protected] or @josephgeha16 on Twitter.
