My Letter to Council on the Business Tax Project | Invest & Innovate | Steve Levy

Dear Mayor Burt and Members of Council,

In 2019, I publicly supported the business tax being discussed in the Finance Committee and the conclusions of the consultants.

But I am not in a position now to support the current proposal.

Here are my reasons, suggestions and comments.

1) The staff report quoted in a Daily Post headline says the top five companies by footage will only pay 20% of BR’s total revenue.

I ask the staff to say, with all the appropriate details, who will pay the remaining 80%.

The BT is presented as a fair tax for (essentially) big, profitable tech companies.

But it looks like they won’t pay the bulk of the tax.


This is especially true if council endorses recommendations to provide compensation to those who pay transitional occupancy or sales taxes. I would exempt them completely, but this proposal goes in part.


if major hotels and retail stores are mostly exempt, then this really focuses on who the heck actually bears most of the burden of the proposed tax.

2) In the 2019 discussions, fairness and competitiveness were identified as criteria for evaluating a BT. They seem to have disappeared from all evaluation.


Since most non-tech companies, regardless of size (the 80% of which we don’t know much), have been partly faced with trends that will continue, such as working from home, shopping online, I see serious equity challenges in the current environment. tax.

Add to that that many of the missing 80% employ a large number of low-wage workers.

The 20% and 80% raise issues of competitiveness as well as probabilities of economic response that were going to be addressed in the 2019 round.

For the 20%, leaving is always a possibility although I do not dispute that here. I think with working from home already and a tax on the area used, we should expect space-saving responses and discount expected incomes accordingly.

For the 80%, we see closures every week. While some may be exempt under the 5,000 square foot exemption, not all will benefit. With a drop in clientele here, not everyone will stay.

Many of our neighboring towns welcome new jobs with a competitive attitude. Saying that we will leave lacks logic.

And these workers are customers for our small businesses.

3) I saw two other staff recommendations in their report – one is a step forward and the other raises questions. I like the recommendation not to tax vacant space and see above how that might increase.

As for companies with multiple sites, I can see the logic of site aggregation for, say, Palantir, but I see no reason to do so for companies like Coupa and CVS that operate separate locations to primarily serve separate customers.

4) Proposals

In the 2019 cycle, we were discussing blanket exemptions.

I would exempt retail businesses, restaurants, and increase the exemption to get closer to the first 25,000 square feet of the EPA – maybe 10,000 or 15,000 square feet.

This serves the goal of fairness and brings the tax closer to the council’s rhetoric that the tax is focused on large tech employers.

Then I would ask the staff to then discuss what we learned from the 2019 round on competitiveness.

5) Related to point 4 is the finding that in many cases the proposed tax is much higher than the tax burden in neighboring cities, as has been seen for then higher tax proposals in the cycle of 2019.

Professionally, I see no reason for the Palo Alto to have a cache argument, with a few exceptions perhaps. Our vacation trends are moving in this direction.

6) it’s probably too late now, but I wish the survey had explored alternatives like, for example, would you prefer tax more if x and y were exempt? or would you prefer the tax more if the uses were guaranteed under the election measure? or would you prefer the tax more if all businesses under 10,000 square feet were exempt?

Stephane Levy


Center for the Continuing Study of California Economics

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