Pandemic Leads Silicon Valley City to Scrap Proposed Business Tax

Tesla Inc., HP Inc., and other Palo Alto, Calif.-based tech giants may not be facing higher business license taxes worth millions in revenue for the city.

The Palo Alto City Council on Monday unanimously adopted a staff recommendation to stop working on the tax measure for the November ballot, pointing to the impacts from the new coronavirus on the Silicon Valley city. The city instead will focus on its business registry, which would help in future tax discussions, a memo to the council said.

A public order to shelter in place has shuttered businesses—particularly restaurants and other small businesses—and would severely hamper outreach about a ballot measure, the staff memo said.

Palo Alto last fall was considering one of three business taxes: a business license tax based on head count, a parcel tax by square footage, and a tax based on square footage. The city chose to move ahead with the business license tax, similar to the voter-approved tax in Google Inc.'s hometown of neighboring Mountain View.

A per-employee tax could raise up to $10 million annually, the city said. City staff was working on the tax measure to close budget gaps of $1.1 million to $2.4 million in fiscal years through 2025.

Palo Alto will reconsider the measure as a work plan for the November 2022 election.

Neighboring San Mateo County supervisors on Tuesday will decide whether to put a $65 per-parcel tax for extended police and fire protection on a June mail-in ballot. The proposed four-year tax would be on parcels in part of the county’s unincorporated area.