Santa Clara County residents could once again see a sales tax hike.
Gov. Gavin Newsom has signed off on a bill giving the county the power to increase the sales tax rate — with voter approval — past the current cap.
Senate Bill 335, authored by Sen. Dave Cortese (D-San Jose), allows Santa Clara County to put a measure on a ballot before December 2028 to increase the sales tax rate by 0.625%. The county currently has the fourth highest sales tax rate in the state at 9.125%, behind Alameda, Los Angeles and San Mateo counties.
“There’s certain things that the county funds that they don’t have general fund resources that are vital to the public,” Cortese told the Mercury News. “This legislation at least ensures that if they find themselves in a situation like that they can take a vote and go to the ballot if they can get enough supervisors to agree.”
California has capped district tax rates in each county at 2% since 1969. Santa Clara County currently has six countywide district taxes adding up to a total rate of 1.8625%, and several cities like Campbell, Los Gatos, Milpitas and San Jose have their own additional tax rates ranging from 0.125% to 0.25%, according to a report from the Senate Committee on Governance and Finance.
A 2017 law authored by Sen. Nancy Skinner (D-Berkeley) gave the county the same powers, however, it expired at the end of 2022 before county lawmakers could place a measure on the ballot. In 2019, the Santa Clara County Board of Supervisors considered a 5/8-cent sales tax increase to fund issues like healthcare and social services, but the proposal ultimately didn’t have enough support.
In a statement, the county said it was “grateful” for the legislature and governor for giving them the “additional tool.”
“The county has significant unmet community needs, especially given the truly vital services that the county delivers,” the statement said.
In June, the county passed a $11.3 billion budget — nearly triple the size it was during the 2009-10 fiscal year. This year, county officials had to close a $120 million deficit. They expect that number to grow to $158 million by the 2024-25 fiscal year.
Pro-business organizations across the state opposed Cortese’s bill including the Bay Area Council, the California Taxpayers Association and the Silicon Valley Leadership Group.
In a statement, Dan Kostenbauder, the vice president of tax policy for the Silicon Valley Leadership Group, said the organization is focused on working with policy makers to “improve business competitiveness for our region so that our leading employers and innovators can retain talent, attract investment and create jobs.”
“We joined with the statewide coalition of business associations earlier this year to convey our concerns about the measure, particularly given the continued macroeconomic volatility and cost pressures on businesses in Silicon Valley,” he said.
In an August report from the California Taxpayers Association, the group estimated the law could come at an annual cost of $360.86 million to taxpayers if implemented.
Pierluigi Oliverio, a former San Jose City Councilmember Silicon Valley Taxpayers Association board member said in a statement that the group would be “opposed to a general tax that can be spent on anything.”
“However, SVTA would be keenly interested in speaking with the county about a tax increase that was 100% allocated to the severely mentally ill and homeless.”
