Santa Clara may ask residents to approve a revision of the business tax in November, despite opposition from regional trade leaders. If accepted, it could bring in millions.
The Central Chamber of Commerce of Silicon Valley sent a letter Monday to the mayor and city council of Santa Clara, opposing any “dramatic increase” in the tax on business licenses paid by companies. The city is considering a “tax on the head” as a way to reduce the budget deficit of nearly $ 20 million in the coming fiscal year.
City officials said updating the tax structure of business licenses could bring in millions of major employers. The current model – which charges between $ 15 and $ 500 based on industry and number of employees – attracts about $ 900,000 in revenue annually, or 0.4% of the total fund. Technology giants such as Intel, Advanced Micro Devices and Nvidia have hundreds of employees and currently pay only up to $ 500 a year under the current tax structure.
The city is considering recommending that these companies pay higher fees based on the number of people they hire to begin reducing the gap in the total fund. But not everyone supports the proposal.
In a letter to the city council, President and Chief Executive Officer of the Central Silicon Valley Chamber Christian Malesic said such a proposal would lead to a “nearly 700% increase” in taxes for the largest local companies. He said the business community opposes any tax increase based on this formula for every company in Santa Clara.
“We hope we can work with the city at this point before the vote,” Malesic told San José Spotlight, adding that the chamber would oppose the proposal if the city council adopts a version of the vote in November.
Malesic said the chamber met with city authorities in April and May with alternatives to tackling the budget deficit rather than changing the tax on business licenses. He proposed a smaller overall tax increase, no more than twice the current amount of revenue collected from the current tax, instead of basing taxes on the number of employees. He said the chamber would also support limiting the total tax the employer will pay, keeping it significantly lower than the county average, or limiting the rate that the tax is raised based on inflation below 5% each year.
The revised license tax was first introduced to the city council last June, with discussions on ways to modernize it held last October. City surveys conducted in January this year showed the pros and cons of changing the tax structure. However, Santa Clara spokeswoman Lon Peterson said that after voters were told the injustice of the 30-year-old model, 64% of respondents supported the consideration of a new tax model for business licenses.
Concerns were also expressed that the companies would leave the city due to a change in the formula for the number of employees, but council member Jain Jain told San José Spotlight earlier that he did not think this would happen. He pointed out that healthy resources such as affordable electricity and optical internet connection are the reason why Santa Clara is more attractive for business than other cities.
Applied Materials is the largest employer in Santa Clara, according to city records. Other major employers in the city include Intel, AMD, Nvidia, Marvell Technology, Silicon Valley Bank and Dell Technologies. These inherited companies took root in the city decades ago. A Nvidia spokesman told San José Spotlight earlier that the company had recently opened its second major headquarters building in the city.
Mayor Lisa Gilmore did not respond to a request for comment on the chamber’s resistance. Peterson told San José Spotlight that the city is already adding elements that the chamber mentioned in a proposal coming to the city council.
CFO Ken Lee told San José Spotlight that the chamber’s proposal to double the current tax “would be less than the CPI of 30 years ago” and said the forthcoming proposal was a balanced approach.
The deadline for a tax measure to vote in November is August. Assistant city manager Cynthia Bohorkes said Santa Clara would submit the final proposal for a model tax on the number of city council employees on July 5th.
Bohorkes said city officials have heard positive reviews of the modernized tax solution despite opposition from the chamber.
“We think it’s sensible and keeps us business-friendly,” Bohorkes told San José Spotlight. “It takes into account the needs of both small businesses and large businesses.”
Contact Natalie Hanson at [email protected] or @nhanson_reports on Twitter.