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California lawmakers are considering coronavirus relief legislation that includes a head tax on the state’s big businesses at a time when some of its most notable names in Silicon Valley are already contemplating setting up shop elsewhere.
The Local Government and School Recovery and Relief Act, which was last amended in the California State Senate this week, includes a proposal to impose a tax “on large business.” Specifically, companies with more than 500 employees “that perform any part of their duties within the state” would pay a tax equal to $275 per employee.
As the state wrestles with the fallout from the virus, it faces a $54 billion budget hole, according to Gov. Gavin Newsom.
The tax, first reported by the Tax Foundation, would take effect beginning in January and last through December 2026.
No other state has a head tax.
Seattle came close to implementing a head tax in 2018, which was also set at $275 per employee annually (on companies that make more than $20 million in revenue). While unanimously approved by the city council, the measure was met with staunch resistance from local businesses – including Amazon and Starbucks. Amazon said it would reconsider projects in the city if the measure went into effect.
Ultimately, Seattle did not follow through with the policy.
Amazon deemed the measure a “tax on jobs,” which could be problematic at a time when California is combating high unemployment levels. The state’s unemployment rate was higher than the national average in April, at 15.5 percent, as it shed more than 2.3 million positions.
Meanwhile, amid the economic fallout from the coronavirus pandemic, some companies are already considering leaving the state.
As previously reported by FOX Business, Peter Thiel and Alex Karp’s software firm, Palantir Technologies, may not remain in California after the coronavirus crisis has subsided, Karp told "Axios on HBO." While no final decisions have been made, Karp suggested Palantir could relocate to somewhere like Colorado.
Musk, who engaged in a dispute with California and local officials in Alameda County over lockdown measures that forced his Tesla plant to close, said he was considering relocating Tesla’s headquarters to Nevada or Texas.
Silicon Valley is also at risk of losing residents as a growing number of workers may not return to offices. Social media giant Twitter, for example, said it will allow employees who are able to perform their duties remotely the option of continuing to do so “forever.” Facebook CEO Mark Zuckerberg followed suit with a similar message shortly after.