Getting big companies to pay more for local infrastructure

The mayor of Cupertino, California wants Apple to pay more for local roads and other services:

Many people in Cupertino, a 60,000-person town in the heart of Silicon Valley, are beginning to organize around their overburdened city. They claim the region is struggling with aging infrastructure and booming companies whose effective tax rate is often quite low. Frustrated by traffic and noise, some in Cupertino are trying to put a stop to more development, which they argue brings more congestion on the roads, parking and train system. But Chang says limiting new development would damage the regional economy and that the real solution should be higher taxes on the wealthy and companies such as Apple…

Convincing local politicians to battle Apple is hard, Chang said. He recently proposed that Apple – which is building a massive new campus its own employees nicknamed the Death Star, or more favorably, The Spaceship – should give $100m to improve city infrastructure. To move on the proposal, Chang only needed to get a single vote ‘yes’ among the three other eligible council members. He failed to get that vote…Meanwhile, the mayor of Cupertino plans to keep pushing Apple to contribute more to the town. Apple paid $9.2m in tax revenue to Cupertino in 2012to 2013, which was about 18% of the city’s general fund budget, according to an economic impact report. Coincidentally that was also exactly the same amount CEO Tim Cook was paid in 2014.

Chang is now working on proposals for a business employer tax that would make companies with more than 100 workers pay $1,000 per employee. Chang argues the employer tax is less regressive than the competing program: a higher sales tax.

Local politicians are often in a tough position in situations like this. Large companies provide prestige and jobs. Many communities would love to have white-collar offices that contribute property taxes and opportunities for local residents. These are such desirable facilities that states and communities race to the bottom in providing tax breaks. (See an example here as well as contrast this to a rural town rejecting a meat processing plant.) Yet, large companies may make heavy use of local services as well as be perceived as sending most of their profits out of the community. So, what do you do when your town needs to pay for roads or the police department or schools and the majority of residents don’t want to pay higher taxes?

I’m guessing that Cupertino has little leverage, particularly if fellow officials and residents are unwilling to go against the big company. Yet, perhaps sustained pressure and some negative publicity might help; one Chicago suburb and its large hospital reached an agreement to help the community meet basic infrastructure needs.

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