Business Tax Reform 2.0 - Fostering Growth and Keeping Companies in San Francisco

Patrick Stelmach's picture

The explosive Twitter tax break war viscerally demonstrates San Francisco need serious change in the way we are attracting and retaining companies (tech and non-tech). But that's just the tip of the iceberg. A recent report by Budget Analyst Harvey Rose spelled out just how toxic SF is for business: a company in the City with 108 employees and a payroll of $5.4 million would pay $81,000 a year in annual taxes while the same business in San Jose would only pay $1,800. San Francisco is the only city in California that charges a payroll tax and the only city in America that taxes employee stock options once exercised. San Jose, on the other hand, charges $18 per employee for businesses with more than eight employees while San Francisco taxes 1.5 percent of the total payroll. The bottom line is: San Francisco’s tax structure is inequitable and a disincentive to job creation.

Many in the city, including SPUR, have argued for years that we should restructure the city’s tax system to remove this disincentive to hiring, replacing the payroll tax with either a gross receipts tax or, better yet, a tax on behavior we want to discourage, like pollution. And with election season and all, everyone is jumping on the tax reform bandwagon

Fortunately, City leaders are formulating legislation to eliminate taxes on stock options and soon could be looking at changing the payroll tax in general. But this is just short-term. The San Francisco Chamber of Commerce said it best: "These “quick fix” measures may help San Francisco appease technology companies in the short-term, but a broader, long-term solution is still needed."

How can we make San Francisco more business-friendly - to create more jobs, to generate more revenue, to balance the budget, to maintain our City's place as a top international economic engine, and stay true to our progressive ideals? We should not give corporate handouts at the expense of City services. So how can we create incentives for businesses to make SF their home and simultaneously strengthen our efforts to help those San Franciscans that don't have a home at all?

Paid for by Phil Ting for Assembly 2012. FPPC ID# 1343137