During election season, it’s not rare to see “sales tax measure” on the ballot, and this year’s ballot in Milpitas is no exception.
If passed, Measure F would require Milpitas residents to pay a higher sales tax of 9.25% for the next eight years, a quarter-point increase from the current 9%. Proponents say the boost will help offset declining tax revenue due to COVID-19.
“We have to make up for the loss of revenue from other funding sources, for example the hotel industry, which was a significant source of revenue for us,” said Milpitas City Councilman Anthony Phan.
Milpitas projects a budget deficit of $11 million this year, and while the city has been using reserve funds, Phan said these will eventually run out. The money that would be brought in by Measure F would go into the city’s general fund and could then be used to pay for such essential services as fire, police, street repairs and municipal facilities maintenance and administration.
It’s estimated the quarter-cent sales tax increase would produce $6.5 million in additional income for the city each year, which would reduce, but not eliminate, the budget shortfall. Measure F was voted onto the November ballot by the Milpitas City Council on Aug. 4, almost five months after shelter-in-place orders were announced. It requires a simple majority vote to become law.
Proponents such as Phan warn that residents can expect to see city services cut if Measure F fails. These would include recreational activities and community services, and ultimately city employees could end up getting laid off, as well.
‘Tough economic times’
“This is meant to be a temporary increase to get us through these tough economic times,” Phan said, noting that groceries and prescription medicines remain exempt from sales tax.
Milpitas Mayor Rich Tran, who initially proposed the measure, also emphasized that the increase “is only a temporary, eight-year sales tax. The City Council can actually end it at any time.”
Tran warned, however, that even if Measure F passes, the city will have to make some cuts, which means both public safety and public works are at risk.
Milpitas’s sales tax has been 9% since April 2017, when it was raised from 8.5%. If Measure F passes, Milpitas will join several other Bay Area cities that have a 9.25% sales tax, including San Jose and Fremont. However, this sales tax will be lower than the 9.75% rate in cities such as El Cerrito and Belmont.
Opposition to Measure F
Critics of the Milpitas measure say the tax hike, while relatively small, creates a new and unnecessary burden for residents, some of whom are already facing greater financial struggles from the coronavirus pandemic.
“I’m particularly annoyed with this measure because I feel like the Milpitas city government has really mishandled the budget. … There have been opportunities to provide more stable tax bases,” said Milpitas resident Molly Current.
While all of the city’s council members support the measure, a strong opponent is Suraj Viswanathan, who is currently seeking a seat on the Milpitas City Council.
“Raising the sales tax on struggling working people and businesses of Milpitas trying to recover from the lockdown — I think that’s the last thing that we should do in the middle of the pandemic because I don’t even believe it’s over yet,” he said.
Addressing the small size of the increase, Viswanathan said: “At the end of the day, taxes are taxes. The City Council is just taking the easiest route out.”
Viswanathan said that there are better alternatives for creating revenue.
For example, he said expediting the city’s building and permit process would help businesses start up more quickly, leading in turn to new revenue from rental payments and business taxes. He also wants car rental services such as Turo and Airbnb to be taxed, as well as distribution centers such as Amazon, since they will also produce a lot of revenue.
The Silicon Valley Taxpayers Association, a group that says it advocates for taxpayer rights, is another opponent of Measure F. Mark Hinkle, the group’s president, called Measure F a regressive tax.
“Regressive taxes clearly hurt the poor and middle class more than the rich,” he said, adding that the city should not end up cutting such services as fire or police, because they are services that people actually want, and that should already be prioritized within the city budget.
Concerns about small businesses
Catherine Trinh, who owns a plant-based cafe called RawASF, also expressed concern about the measure’s impact on small business.
“We are all in favor of shorter [emergency] response times for when people need help and funding for better schools … (and) maybe that money will be generated for better schooling and better law enforcement and better response,” Trinh said. “But at the same time it could have a negative effect on small businesses, especially small businesses that are catering to more healthy eating.
“It will affect our business because people will choose a cheaper option for food like McDonald’s,” she added. “People only have a certain budget to spend and so they’re going to spend it on something that’’s cheaper and not really regard how healthy it is.”
“If you’re going to increase taxes you’re basically eating into the revenue that this person can make,” Viswanathan echoed.
Phan, however, said businesses are able to pass the tax along to consumers, adding: “It’s a quarter cent so when consumers take a look at their receipts, it’s unlikely they will even notice a difference.”
Current, who opposes the measure, said that even if Measures F passes, she won’t take her business to neighboring towns with lower tax rates.
“My city is my city, and I’m still gonna shop at the same places,” she said. “It’s not significant enough of a purchase increase that’s gonna drive me.”
And even some opponents of the Milpitas administration see the new tax as a necessary evil.
“For me it’s OK,” said Voltaire Montemayor, who is running against Tran for Milpitas mayor. “(It’s a) sacrifice for the cost.”
Adds his opponent, Mayor Tran:
“I have great confidence and faith that 50 percent plus one of Milpitas voters will support this measure. Many residents don’t mind paying the extra one fourth of one cent to get us through this 100-year pandemic.”