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Tech Billionaires’ Obligation to the Cities Around Them
California voters are being asked to tax big corporations to solve local problems. But is that the companies’ responsibility?
Nov 4, 2018
Eric Risberg / AP
For decades, technology entrepreneurs have established their headquarters in the San Francisco Bay Area, created products that changed the way we live, and reaped millions doing so. But at the same time, the cities around these companies have become harder and harder to live in. Housing prices and homelessness are rising, roads are clogged, transit is over capacity. Tech companies aren’t necessarily causing these problems, but they do have a lot more money than anyone else in today’s economy. So cities are asking those who benefit the most in this economy to pay more money to help solve urban and suburban problems.
Not all companies have proven willing participants. When Cupertino proposed charging companies, including Apple, $124 per employee to raise funds to relieve traffic congestion, Apple pushed back, saying it had contributed $70 million to “public benefits” over the course of completing its headquarters in Cupertino. Cupertino shelved the referendum until 2020. Amazon and the Seattle Chamber of Commerce lobbied so vociferously against a head tax passed in Seattle that the City Council repealed it less than a month after it was passed. Google and LinkedIn contribute a lot of money and services to Mountain View—Google sponsors the city’s community shuttle, for example—but “other companies, not so much,” the mayor of Mountain View, Lenny Siegel told me. “New wealth doesn’t give as much money as old wealth.”
But tech companies’ ability to decide what they contribute and don’t contribute to communities on their own terms may be ending. In San Francisco, Mountain View, and East Palo Alto, ballot referendums would impose additional taxes on big companies in order to solve problems related to a lack of affordable housing and funding for transportation. And tech companies are being forced to ask themselves whether they’re willing to play an active role in changing their neighborhoods, not just the world at large.
“We have to come to some kind of reckoning that when you make millionaires out of people, and they buy houses for millions of dollars, other people are going to be on the end of that,” Glenn Kelman, the president and CEO of Redfin, which supported the Seattle head tax, told me, about tech leaders. “We’ve always viewed ourselves as the hero of every story, and we’re about to see that we may be the enemy of this one.”
In San Francisco, voters are being asked to approve Proposition C, which would levy a tax on businesses with receipts of over $50 million in order to fund housing and homelessness services. In Mountain View, it’s Measure P, a per-employee tax on companies with more than 5,000 employees; Google, which has more than 20,000 employees, could be saddled with about $3.3 million annually. And in East Palo Alto, residents are voting on Measure HH, which would charge companies with more than 25,000 square feet of commercial office space a tax of $2.50 per square foot to raise money for affordable housing and job-training programs. The tax could hit Amazon, which is opening new facilities there.
For decades, tech entrepreneurs have portrayed themselves as change agents creating world-altering products and then using their wealth to advance liberal policies. Yet their philanthropy is often focused on big projects that have national or global impact. When it comes to paying higher taxes to fund local projects, some companies have begun acting less like revolutionary organizations that are changing the way society works and more like, well, companies: opposing new local taxes based on the argument that they will hamper their ability to do business.
The initiative that has drawn much of their opposition is Proposition C in San Francisco. If passed, it would levy a tax of 0.175 to 0.65 percent, depending on the type of business, on gross receipts of companies making more than $50 million, to be used for homelessness services. It would raise around $300 million, doubling the city’s homelessness budget.
The hundreds of millions of dollars raised could house 4,000 households, keep 7,000 people in their homes, and eliminate the waitlist at homeless shelters, Jennifer Friedenbach, the executive director of the Coalition on Homelessness, which put forth the initiative, told me. She argues that large companies just got a 14 percent reduction in their corporate tax rate, and that the federal government is divesting funding in housing for poor people, so big companies “have a responsibility as corporate citizens to pay.” Though some companies have given to charity in the city, others have not, she told me. “Charity is one time. Systemic change is forever,” she said.
Perhaps unsurprisingly, many of the companies and individuals that would be hit by the tax oppose it. “Prop c is the dumbest, least thought out prop ever,” Marc Pincus, the chairman and co-founder of Zynga, tweeted Saturday, urging voters to “get the facts and vote no,” while himself tweeting some incorrect information, including that 60 percent of homeless in the city are from outside of California. Stripe, the payments company, has given $419,000 to the San Francisco Chamber of Commerce group opposing Prop C, according to the San Francisco Ethics Commission, which tracks election spending. Lyft gave $100,000, Visa gave $225,000, and Square gave $25,000. Jack Dorsey, the co-founder and CEO of Twitter, gave $125,000; Paul Graham, an entrepreneur who founded YCombinator, gave $150,000, Michael Moritz, a venture capitalist with the firm Sequoia Capital, gave $100,000.
Dorsey tweeted that he wanted to see long-term solutions rather than “quick acts to make us feel good. ” Stripe said it didn’t think spending more on anti-homelessness problems was the solution, and that the $770 per person that San Francisco spends per person on homelessness is far greater than what other cities spend. Both companies have emphasized that some prominent San Francisco politicians, including newly elected Mayor London Breed, and state senator Scott Wiener, oppose Proposition C.
But others in the tech community have called this opposition to new taxes a cop-out, and chastised people like Dorsey for trying to defeat Prop C without coming up with any other meaningful plan. In an op-ed in the New York Times, Salesforce’s CEO Marc Benioff chided fellow entrepreneurs in San Francisco for embracing the “myopic” view that businesses exist only to make shareholders money, not to help the community where they’re located. “It’s absurd to believe that these businesses can’t afford one half of 1 percent of gross receipts to help address the most important problem facing our community,” he wrote. He sparred with Dorsey about Prop C on Twitter—Dorsey called him a “distraction.”
Benioff has a history of giving charitably in San Francisco, but he told me that it can be hard to get everyone in tech to do the same. In 2014, he tried to get local companies to donate to a campaign he called SF Gives that funded an anti-poverty campaign in San Francisco. What he found asking for money then, and talking to local entrepreneurs about Prop C recently, is that “it turns out to be there are two kinds of people, those who give, those who don’t give.”
“Right now, we have a crisis of inaction, a crisis of indifference,” he said.
Most tech companies have actually seen their tax rate fall in San Francisco over the last few years. In 2012, voters approved an initiative to switch San Francisco from collecting a payroll tax on businesses to collecting a gross receipts tax, a change that favored tech companies over higher-grossing businesses like hotels and construction companies. But as tech companies paid less than they had before, the city collected less money, so much so that it hasn’t been able to fully phase out the payroll tax because it isn’t collecting enough money from the gross receipts tax. The city will likely have to change the way it collects business taxes in the next few years, said Molly Turner, an urban planner who lectures at the UC Berkeley Haas School of Business, and is also on the board of , the San Francisco Bay Area Planning and Urban Research Association, which supports Prop C. Turner said that passing Prop. C might make it harder to negotiate those new taxes, but that few tech leaders have come up with any new suggestions for solving San Francisco’s homelessness problem.
“Benioff made a really strong point, which is that many tech companies have not been very engaged on this issue,” she said. “Their first time weighing in is a rejection of the proposed solution, without any new ideas.”
Read: How Amazon Killed Seattle’s Head Tax
For Benioff and some other tech leaders, giving to improve the community around them can also be good business. If a city has good public schools, rapid and affordable transit, and safe streets, talented employees will want to live and work there. If employees have to navigate around homeless people on their way to work and see open drug use on the streets—as all but the most sheltered San Franciscans currently do—they will not want to stay. “We cannot separate our business from that of the city—we have to advocate for all our stakeholders, not just our shareholders,” Benioff told me.
I reached out to 15 of the biggest technology companies in San Francisco to ask if they were taking a position on Prop C , or if they had given to any other housing or transportation initiatives in the Bay Area. Many told me that they were supporting local nonprofits, but often, this support was in the form of employee volunteer hours, rather than in cash. (Local nonprofits have expressed frustration to me with tech volunteer days, in which crowds of untrained volunteers descend on their nonprofit for a day, and for whom staff has to spend days preparing; most nonprofits would much prefer cash.)
Some companies—including Facebook, Google, LinkedIn, and Cisco—have donated tens of millions of dollars to affordable-housing initiatives in the Bay Area.
But other companies’ donations are more amorphous. Twitter, for instance, referred me to #TwitterforGood, a company Twitter account highlighting the company’s various efforts in the community, which seems to vary from teaching educators how to use Twitter, and days of service at local charities. Twitter has also created a community learning center called NeighborNest in the Tenderloin that teaches local residents about technology and coding, but the center was part of Twitter’s obligations under the Twitter tax break, which exempted the company from payroll taxes in exchange for community-outreach programs. In 2017, 257 Twitter employees volunteered for NeighborNest. (The company had 3,372 employees in 2017.) Twitter also trained nonprofits in how to use Twitter, and gave seven nonprofits promoted tweet campaigns as part of its community outreach.
Dropbox told me its foundation, volunteer program, and company matching program work with community organizations; Uber says it’s donated “in the tens of thousands of dollars” to various nonprofits; Lyft skirted the question of work in the community altogether and said it supported Mayor Breed “in implementing fair approaches that most effectively address homelessness.”
Notably, a number of tech companies, including Google and Facebook, also gave to a campaign supporting Regional Measure 3, a June referendum that asked voters to raise tolls on Bay Area bridges. The initiative, which passed, was criticized for passing the costs of transportation projects onto commuters, rather than to the companies that employ them, and for failing to address the housing shortages that forced commuters to live further and further away.
There are many reasons why companies may not give a lot to the community where they’re located. Some are still start-ups who are trying to make a profit and provide returns to venture capitalists who would view it unwise to spend extra money on charitable endeavors. Even some public tech companies aren’t in the black—Twitter said in its annual report last year that it had a deficit of $2.67 billion. (Then again, Jack Dorsey’s net worth is nearly $5 billion.) It may be fairer to ask companies to give back when their finances are more stable, and indeed, it is the big, established companies like Cisco, Facebook, and Google, that have given the most voluntarily. Some tech founders may not give liberally to housing or transit issues because they’ve been trained in the world of business and technology, but don’t feel comfortable taking positions on public policy.
But some companies and individuals can afford to give and aren’t. Many seem to prefer to divert money to a private foundation rather than handing over money to the city or to local nonprofits whose solutions—like giving someone a home—can’t necessarily be scaled. “Whether a company really decides to invest in some of these housing initiatives comes down to the culture at the top, who that leader is, how invested are they in San Francisco, as well as how liquid is their wealth, and do they have a lot of cash to donate to philanthropy or not,” Turner, the Haas professor, said.
That’s why many cities have decided that merely expecting wealthy companies to pitch in to help solve pressing problems does not work. This is the problem inherent in entrusting philanthropists with saving society—even when they do spend their money, they can spend it on whatever they want, often beyond their backyard. Many Silicon Valley founders are fans of effective altruism, for instance, which seeks a way to make their money do the most good, which often means spending it in the developing world. A 2016 report found that 90 percent of philanthropic dollars from Silicon Valley donors are leaving the region.
Read: The ‘Black Hole’ That Sucks Up Silicon Valley Money
Philanthropy alone also can’t solve all the problems facing some of these cities. Benioff and Friedenbach, of the Coalition on Homelessness, say that the only way to solve San Francisco’s homelessness problem is to spend more—treat more severely ill people, permanently house more people, prevent more evictions, create more emergency shelters and more public restrooms. “With 7,500 homeless, this has gotten way beyond any one particular philanthropist,” Benioff told me. “We all have to come together to make this happen.”
Mountain View decided to put its head tax on the ballot because its problems were too great for the city or one philanthropist to solve alone as well, Siegel, the mayor, told me. While the city is extremely grateful for the work that Google and LinkedIn do there, the costs of congestion are becoming so high in Mountain View that it’s threatening the ability of companies to be able to continue to prosper, he said. Though two business groups asked Mountain View not to put Measure P on the ballot, none have actively lobbied against it, and LinkedIn and Google said they would not oppose it.
That’s because the companies see that Mountain View bringing in more money for transit and housing projects is actually good for business, he said. “The biggest threat to the continuing viability of our tech companies is their ability to attract employees, and they can’t attract employees if there’s no place for them to live,” he said. Mountain View’s measure only affects companies making more than $5,000, and is graded so that companies making the most pay the highest per-employee tax. Another difference between donations and taxes: The city can bond against anticipated tax revenue. Mountain View won’t phase in the business tax—if it passes—until 2020, but it can still sell bonds based on the revenue it will reap, and make major capital investments in transportation.
It’s possible that as problems grow in places where tech companies are located, voters will expect more public officials to follow Mountain View’s lead. In 2014, Mountain View voters replaced three council members who had opposed a planned housing development with Google with three members who supported it. But other cities may face more vociferous pushback from local companies—Siegel pointed out that Apple has not given very much to Cupertino. “They take the attitude that we gave you the iPhone and we pay taxes, and that’s enough” he said.
Employees might push their employers to step up more too. Catherine Bracy co-founded the Tech Equity Collaborative, which brings together employees of tech companies to advocate for public-policy solutions to some of the region’s biggest problems. She thinks that asking workers and citizens, rather than companies, to get involved, is a more democratic approach. “Tech didn’t create this problem, asking them to fix it singlehandedly is not fair,” she said. Already, tech workers have helped gather signatures for a possible 2020 ballot referendum that would end tax breaks for corporations embedded in Proposition 13, the 1978 property tax bill that has hamstrung California communities from raising money for more than three decades.
It’s still unclear how Prop C will fare at the ballot box on Tuesday. The last time a major West Coast city tried to tax business to fund homelessness services, the counterargument was essentially the opposite of the one Benioff is making now: That throwing more money at the problem isn’t the solution.
“I do not know that more revenue would solve” the homelessness problem, the chair of the Seattle Metropolitan Chamber of Commerce, told me in June. After pressure from big businesses and the Chamber, Seattle repealed its head tax and council members pledged to find another solution. Since then, no new housing initiatives have been put forward, according to Katie Wilson, the General Secretary of the Transit Riders Union, which had been involved in head-tax negotiations. Meanwhile, Seattle’s homelessness problem is getting worse. This year, the city is on track, she said, to set an annual record for how many homeless people die outside.
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Alana Semuels is a staff writer at
The Atlantic. She was previously a national correspondent for the
Los Angeles Times.