San Jose Ballot Measure Seeks to Raise Revenue for Publicly-Financed Jobs

NJFAC Board Member Prof. Scott Myers-Lipton headed up a successful minimum wage campaign in San Jose, CA, and is now leading the charge for a local government job creation.   For more info, visit Step Up Silicon Valley at: http://stepupsv.org/

San Jose: Proposed ballot measure ties business tax to revenue

By Ramona Giwargis, San Jose Mercury-News, 12/14/2015
Cross-posted from San Jose Mercury News

Aerial view of downtown San Jose, September 2015, with SAP Center in the foreground. A major office, retail and housing project has been proposed for more than eight acres between the arena and Highway 87. (Karl Mondon, Bay Area News Group)
Aerial view of downtown San Jose, September 2015, with SAP Center in the foreground. A major office, retail and housing project has been proposed for more than eight acres between the arena and Highway 87. (Karl Mondon, Bay Area News Group)

SAN JOSE — Of the Bay Area’s major cities, San Jose stands alone in not taxing its large businesses based on their earnings. But the local professor who led a successful 2012 ballot measure to raise the city’s minimum wage is fixing to change that in the coming year.

Advocates argue the city’s high-tech giants that helped give Silicon Valley its name aren’t paying their “fair share” of taxes to help patch up pot holes, hire more police officers and clean up city parks.

A new initiative being eyed for the November 2016 ballot would do just that, according to its authors.

Scott Myers-Lipton, a sociology professor at San Jose State, and the force behind a ballot measure that raised the city’s minimum wage by 25 percent, is shopping around an initiative that could tax businesses based on their gross revenue within the city — a practice already underway in Oakland, San Francisco and 24 other California cities.

“We’re one of the only major cities in California that doesn’t have a gross-receipts tax,” Myers-Lipton said. “Other cities have modernized their business tax.”

San Jose is home to an estimated 90,000 businesses that pay taxes based on a flat rate — regardless of the company’s revenue. The businesses pay $150 annually, plus $18 per employee per year for those with more than eight employees.

But that amount is capped at $25,000 a year, even if a business makes tens of millions of dollars.

The proposed initiative would charge businesses a “modest tax rate” each year based on their total gross revenue. The amounts haven’t been worked out, Myers-Lipton said, but Oakland charges anywhere from 60 cents to $13.95 for every $1,000 in revenue. The range is based on a company’s profits — the ones that make more, pay more.

Myers-Lipton said the San Jose proposal wouldn’t tax more than $1.20 for every $1,000.

Only two industries in San Jose are taxed based on what they earn per year: 10 percent on medical marijuana collectives’ revenues and 15 percent on the city’s two casinos. Those two sectors alone put an estimated $22 million in the city’s pocket last year — significantly more than the business tax which brought in $11.7 million.

The revenue from the proposed tax would go into San Jose’s general fund, the professor added, to fund police, firefighters, libraries, parks and other basic services.

But not all businesses would be included in the plan. The tax would exclude small businesses — those earning less than a certain amount. The threshold is less than a million dollars in Oakland, he said.

“We don’t want to hurt small businesses like the mom-and-pop shops,” Myers-Lipton said. “Our hope is that the business community rallies around this and sees the positive impacts of better roads without potholes and more police officers.”

Scott Knies, executive director of the San Jose Downtown Association, said proponents should reach out and initiate talks with the businesses community early on to gain support.

“We all want more resources to accomplish a greater good for the city,” Knies said. “But I’m hoping that there’s going to be some dialogue with the business groups. The business tax policy for San Jose should not be determined by a sociology class project.”

Myers-Lipton promised to engage business leaders before moving forward with the initiative. He said the idea for the initiative came from talks with policy advocates related to a book he’s written about ending inequality and poverty — not from his class.

Most other local business advocates were mum about the proposal this week.

Matt Mahood, CEO of the San Jose Silicon Valley Chamber of Commerce, didn’t respond to requests for comment Wednesday. A spokeswoman said the group “does not have a comment to add at this time.”

Mayor Sam Liccardo, who’s pegged himself a business ally and pushed measures to attract new companies to San Jose in his first year in office, also declined to comment.

Carl Guardino, CEO of the Silicon Valley Leadership Group, which represents dozens of companies that would be impacted by the measure, said he didn’t know enough about it.

“To date, it has also not been brought to our attention by any of our member companies,” Guardino said in an email.

Vice Mayor Rose Herrera says there are already several other tax measures on the 2016 ballot.

“I worry about turning off voters with so many different tax measures,” Herrera said. “We need to make sure we’re prioritizing the most important measure.”

Herrera is also concerned the measure could have “unintended consequences” on the city’s economic and job growth.

“Over the past year, San Jose is finally gaining traction in bringing bigger companies like Apple here,” she continued. “We don’t want to discourage companies from coming here right when we’re getting started.”

Political strategists say the measure’s creators need to show it will provide a gain in the city’s revenue stream to win support during a presidential election — but the timing is right.

“I don’t think it’s a slam dunk, but the best time to put a tax measure on the ballot is during a presidential year,” said Larry Gerston, a political science emeritus at San Jose State. “You’re going to have higher turnout from lower-income minorities and they tend to vote for measures that provide more government services.”

As San Jose experienced multimillion-dollar budget shortfalls in recent years, the number of police officers dwindled from nearly 1,400 to about 1,000 and a billion-dollar backlog of infrastructure projects loomed.

Supporters of the proposed measure say it could reverse those trends.

“We want San Jose to be a world-class city,” said Gregory Kepferle, CEO of Catholic Charities of Santa Clara County, which started Step Up Silicon Valley, an anti-poverty network working with Myers-Lipton on the initiative.

“And a world-class city needs world-class roads, library services, police, after-school and senior services,” Kepferle continued. “All the things that make it possible for a business to move to San Jose and to be prosperous.

If the proposal moves forward, supporters plan to submit a draft of the measure in January and will have six months to gather a little more than 20,000 signatures to qualify it for the ballot.

Follow Ramona Giwargis at Twitter.com/ramonagiwargis or contact her at 408-920-5705.