An article appeared in last week's San Jose Business Journal about San Jose considering a tax increase for businesses. Surprisingly, the city collects only $10-11 million of business tax revenue a year, much less than other cities in the bay area (Oakland collects $51.5M, SF collects $391.1M). The proposal currently being discussed is a way to double the amount of revenue that San Jose collects from the 54,800 businesses, the largest number of any city in the Bay Area.
I actually have to strongly disagree with this idea. Right now there are many regions of San Jose with office vacancies hovering around 25%, dramatically higher than many other Santa Clara County cities like Palo Alto and Mountain View. Raising business taxes in any way, will simply provide another reason for businesses to not come to San Jose.
This isn't a possibility, this is an economic fact. You cannot raise taxes without a negative consequence.
The are two possible exceptions to what I said above:
1.) If San Jose is considered a luxury "product or service" where increasing the price makes it more attractive instead of less (think Bentley, Gucci, etc.). I don't think this is the case.
2.) If the money raised from businesses can be used to provide an improvement to those businesses greater than the additional cost they are paying (think Downtown's PBID)... this is unlikely since the money will likely go straight to the deficit.
Okay, now that I bashed this idea let me offer 2 suggestions:
1.) Use supply and demand to determine when to raise taxes. For example... when office vacancies hit 5%, then slowly increase the tax while lessening the negative impact. Don't do it when we desperately need these spaces to be filled.
2.) Sell additional services to businesses that companies would gladly pay a premium on. A great example is permitting, which has been a San Jose weakness for some time. Let a large company pay substantial extra fees to expedite the permitting process and move a project along faster (have nightshift and weekend employees if needed). The additional money those companies will get by opening the door faster will easily justify whatever extra amount they have to pay. We also want a brand image where San Jose is the best possible city for leading companies; enabling them to execute and build faster is perfectly inline with this image.
Source:
SJBJ
