Silicon Valley flexes muscles in governor’s race, tax battle

from Dan WaltersCalMatters

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Over the past half century, digital technologies have transformed the daily lives of people everywhere and created vast new industries. But no place on the globe has been more affected than its birthplace.

The Santa Clara Valley’s transformation from a bucolic fruit producer to the tech hub of Silicon Valley—thanks in large part to the presence of Stanford University—fueled a dramatic evolution of California’s economy, making it the fourth largest in the world, be it a nation.

Technology is not only an essential element of the economy; the enormous personal wealth of its creators became – perhaps unfortunately – a crucial source of revenue for the state. The top 1% of California taxpayers generate nearly half of personal income taxes, or, to put it another way, nearly a third of the state’s general fund revenue.

Despite its importance to California’s economy and budget, Silicon Valley has not received much attention from state government compared to other major economic sectors.

While farmers, bankers, health care providers, casino-owning tribes and other segments of the economy have hired lobbyists and doled out campaign cash, tech moguls have accepted that their products and services are so obviously valuable to the state that they don’t have to worry about what happens in Sacramento.

This attitude is changing rapidly.

Efforts to regulate artificial intelligence, the industry’s hottest new product, and impose new taxes on businesses are fueling campaign war chests—for elect friendlier legislatorsoppose hostile legislation and block ballot measures like the one that would imposed a new wealth tax.

Silicon Valley is also doing something it would never have done in recent years — trying to elect a tech-friendly governor.

The the range of gubernatorial candidates is widebut the two are likely to have the most campaign cash billionaire investor Tom Steyer and San Jose Mayor Matt Mahanwhich represent the ideological parameters of democratic hopes.

Steyer is making an apparent bid for support from the Democratic left wing, backing efforts to raise taxes on corporations and the wealthy, while Mahan is counting on his friends in Silicon Valley to provide as much money as he needs to achieve credible success.

Techies are diving into the gubernatorial campaign because Gov. Gavin Newsom, who has generally supported Silicon Valley in political battles — particularly conflicts over taxes and artificial intelligence — will be gone in a year. And as his governorship winds down, the state’s Democratic Party appears to be moving left.

Steyer said this week that if elected, he would call a special election to change California’s iconic property tax cap, Proposition 13, so that commercial property taxes could be raised. This change, called “roll-splitting” and long sought by public employee unions, was rejected by voters in 2020 but remains a holy grail among labor unions and other left-wing groups.

Steyer told Politico that cuts to federal aid to states by President Donald Trump and the Republican-dominated Congress leave a budget hole that must be filled with new business taxes.

“We really can’t wait,” Steyer said. “We’re on the clock. So, yes, the only way we’re going to pass this is through a special election.”

Mahan immediately rejected Seyer’s tax plan, calling it “the wrong approach.”

Steyer also endorsed the proposed wealth tax, which would hit Silicon Valley billionaires and has already resulted in some residency changes to Florida and other low or no income tax states.

Meanwhile, Mahan joined Newsom in opposing the measure, saying it would backfire by encouraging wealthy people to leave California and take their taxable income with them.

This could be the year that Silicon Valley, which changed California’s culture and economy, also reshaped its politics.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.