California wants to close hole in budget due to quarantine due to new tax

Given the economic impact of the coronavirus pandemic, some companies are considering leaving California, writes Fox Business.

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California lawmakers are considering the COVID-19 Pandemic Recovery Act, which includes statewide large enterprises being taxed while some of Silicon Valley's most prominent brands are already considering moving headquarters to other locations.

The Local Government, School Restoration, and Assistance Act, which was last amended by the California Senate at the end of May, includes a proposal to introduce a “big business” tax. In particular, companies with more than 500 employees, "which carry out any part of their activities on the staff," will pay an additional tax of $ 275 per employee.

According to Governor Gavin Newsom, as the state is struggling with the effects of the virus, it is faced with a budget hole of $ 54 billion.

The fee, first announced by the Tax Fund, will enter into force on January 2021 and will be charged until December 2026.

No other state has a “head-to-head” tax on employees.

Seattle approached the introduction of such a tax in 2018; it was also set at $ 275 per employee per year (for companies whose revenue exceeds $ 20 million). Although the measure was unanimously approved by the city council, it met stiff resistance from local businesses, including Amazon and Starbucks. Amazon said it will review projects in the city if the measure takes effect.

As a result, Seattle did not implement this policy.

Amazon considers this measure a “job tax,” which can be problematic when California is struggling with high unemployment. In April, its state figure was higher than the national average and amounted to 15,5% (the state lost more than 2,3 million positions).

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Meanwhile, amid the economic consequences of the COVID-19 pandemic, some companies are already considering leaving the state.

Elon Musk, who has entered into a dispute with California and local officials in Alameda County over quarantine measures that forced him to close his Tesla plant, said he is considering moving the company’s headquarters to Nevada or Texas.

Peter Thiel and Alex Karp software company Palantir Technologies may not stay in California after the crisis subsides. Although no final decision has yet been made, Karp suggested that Palantir might move somewhere to Colorado.

Silicon Valley is also at risk of losing residents, as a huge number of workers may not return to offices. For example, the social media giant Twitter said employees capable of performing their duties remotely can continue to do so “forever.” Soon after, Facebook CEO Mark Zuckerberg followed suit with a similar message.

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