Thursday, May 24, 2018

Is the Seattle Head Tax Contagious? Cupertino? Mountain View?

As we know Seattle enacted a controversial head tax over the objections of Amazon, its largest employer, and Starbucks. Progressives are eager to reallocate (tax) the success of others. Apple paid $9.2 million in taxes to Cupertino in the 2012-2013 year, 18% of the city’s revenue, but it’s apparently not enough. Apple’s massive new headquarters will add an additional $21.5 million in taxes to Cupertino, but it’s not enough. Cupertino’s City Manager is now proposing a head tax up to $1,000 on Apple, the city’s biggest employer. Then Mayor Barry Chang proposed in 2016 that Apple pay $100 million for infrastructure in the city. They’re thinking of transit, but they’re not sure. Some Cupertino residents and political leaders suffer from a combination of envy and greed. Cupertino was a quiet, sleepy bedroom community on the San Francisco Peninsula when a small one-year old company moved out of a garage in 1977 onto Stevens Creek Boulevard in Cupertino. The fledging Apple Computer Company then moved to 10260 Brandury Drive the next year, and grew the site into the 17½ acre Apple Park. Apple’s new headquarters sits on 175 acres of land. The building is designed to accommodate 12,000 workers. They don’t have to be in Cupertino. Cupertino hit the jacket through no effort on its part with the success of Apple. Apple may seem to have leverage over Cupertino, but it has completed its 2.8 million square foot spaceship inspired, ) Ring looking $5 billion headquarters in Cupertino. Apple used up goodwill in threatening to move its headquarters elsewhere if Cupertino failed to approve the project. Now that its built, Apple has lost that leverage. Apple certainly has the financial resources to abandon Cupertino, but it would look foolish in doing so. The company netted $13.8 billion in the just ended quarter. It is planning to return to the United States $215 billion in earnings parked offshore. It can easily afford to write off $5 billion. Apple has opened operations elsewhere in the United States, including Nevada and Texas. Nothing compels it to stay in Cupertino. Apple doesn’t need Cupertino. California law requires a two-step process in enacting a tax. It has to first be approved by the City Council and then by a vote of the citizens. Apple will have a strong chance of winning one or both of the two votes. If it loses, look to Apple to move more of its operations out of Cupertino, or Silicon Valley, or even California. Mountain View, home to Google and is parent Alphabet, is proposing a head tax on its bigger employers. Mountain View’s Mayor Lenny Siegel said the city has “too many good jobs,” and not enough transit. He’s asserting that the economic growth of Mountain View has outstripped its public transit and housing. Perhaps he would like to be mayor of a city comprised of barrios and ghettos. The Mayor is thinking of proposing a head tax of $250-$300/per worker. About $5.8 million would hit Google. Mayor Siegel also explained “Google has billions of cash floating around. They made billions off the tax bill. They can afford to spend a little more here.” That’s the argument – “They have the money; they can afford it. So let’s just take it through taxation.” Alphabet (Google) has offices in Ann Arbor, Atlanta, Austin, Boulder, Cambridge, Chicago, Irvine, New York City, Northern Virginia, Pittsburgh, and Seattle. It employs 24,000 in Mountain View, but it is not locked in. The company is mobile. Similarly, the citizens of Seattle may vote to overturn their head tax by referendum. These cities with profitable technology firms host a mobile industry. Factories can’t just pick up and leave. Electrons can.

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