Santa Clara County proposes ‘regressive’ sales tax hike for COVID-19 costs

Despite admitting that sales tax hikes are “regressive,” Santa Clara County lawmakers want taxpayers to help foot the bill for COVID-19 costs that have drained the county coffers.

On Tuesday, the Santa Clara County Board of Supervisors approved a referral from Board President Cindy Chavez to explore placing a general five-eighths of one cent retail sales tax increase for the November ballot. The tax would last 60 months under the assumption that the economy will recover by then, according to county documents.

Supervisors Mike Wasserman and Joe Simitian opposed.

Chavez said a public poll shows enough voter support for the new tax measure, though it was not publicly released. The poll was paid for by nonprofits Destination: Home and Working Partnerships USA, which support the measure.

“The world has changed quite a lot since the first time we discussed bringing forward a tax… but this is such a historic crisis and the reason I’m bringing this forward is that I am very concerned that without local response, without taking things into our own hands, that relying on the state government to come and save us is not a real thing,” Chavez said.

Chavez admitted the sales tax is regressive, but said it’s the only way the county can patch up its significant budget shortfall. Counting on the federal government or Silicon Valley billionaires to bail the county out is not an option, she said.

“I wish we could raise the needed funds form millionaires and billionaires and Fortune 500 companies, but we can’t do that as a county,” Chavez said. “I want to reinforce that the tax is temporary and I’m hoping it’s a bridge to address the pandemic in a local, wholesome way.”

The county is facing a budget deficit of more than $300 million, officials said, and will hold budget hearings next month.

Supervisor Susan Ellenberg expressed concerns with taxing people hit hardest by COVID-19 and said there’s no guarantee the money — which goes to the county’s general fund — would be spent on pandemic relief efforts. She said the tax will be carried on the backs of people who are unemployed, whose businesses are shuttered and who are facing eviction.

“The impact of a sales tax will be felt most by the small businesses and families hit hardest by the pandemic,” Ellenberg said. “We are literally asking those who can least afford to do so to help us bail them out. It’s hard in good conscience to ask those hit hardest to pay more… without some clear accountability.”

Ellenberg demanded a budgetary estimate of the county’s COVID-19 costs and a plan to help small businesses get back on their feet.

County administrators said they expect a decline in property taxes in 2021-22, further exacerbating the county’s budget deficit. The tax revenue from the ballot measure would fund the county’s COVID-19 response, including providing food and shelter, contact tracing, and testing and treatment of patients in county hospitals, according to the referral.

The money will also “preserve the safety net services” provided by the county, Chavez said, including housing, behavioral health, foster youth and immigrant support programs.

The tax is expected to generate an estimated $250 million to the general fund beginning in 2021. It would need a simple majority from voters to pass.

The tax would take effect in January, which Chavez said could prevent the county from making service cuts.

“COVID-19 and the necessary actions taken by the county in response to it have created a temporary, drastic financial crisis that threatens not only our ability to fund the public health response to the pandemic in the months ahead but also our ability to adequately fund the basic safety net, and emergency and public safety services that residents rely upon during normal times,” the referral said.

Nonprofit leaders on Tuesday expressed support for the proposed tax, sending letters to the board urging them to move forward.

“We don’t need to know the exact money we’re going to be short. We know it’s going to be an amount we can’t meet without additional revenue sources,” said Bob Brownstein, a strategic advisor for Working Partnerships USA. “It’s like, ‘How fast is the Titanic sinking?’ The only thing that matters is it’s sinking faster than the rescue can manage. You don’t need to know the speed.”

But Silicon Valley residents say the proposed tax would make an unprecedented financial crisis much worse.

“Residents are taking an economic hit from the never-ending lockdowns, and recommending a sales tax increase during these difficult times is simply tone deaf,” wrote resident Bill Hough to the board. “Since the shutdowns began, county government has shown little sympathy to residents who have been ruined financially.”

County lawmakers will discuss next steps on Aug. 6.

Editor’s Note: Derecka Mehrens, the executive director of Working Partnerships USA and Jennifer Loving, the executive director of Destination: Home, sit on San José Spotlight’s Board of Directors.