Tax break key to Newsom's local stimulus plan
By: Brent Begin
Examiner Staff Writer
February 12, 2009
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| Looking for answers: Mayor Gavin Newsom, right, fields questions with Oakland Mayor Ron Dellums at the Mayor’s Economic Forecast event. (Cindy Chew/The Examiner) |
SAN FRANCISCO — A significant local business tax would be suspended for two years for firms that create new jobs as part of an economic stimulus plan Mayor Gavin Newsom unveiled Wednesday.
Businesses hiring new workers would be exempt from the payroll tax — a 1.5 percent tariff on the total wages paid to workers. The proposal would suspend that requirement for the next two years for new jobs, either from existing businesses that increase their work force or new businesses that come to San Francisco.
The tax is one of the largest revenue streams supporting city services such as police, street improvements, parks and health care.
The exemption is expected to cost The City $5 million in lost taxes over two years.
“The cost in city revenue is nominal because there is expected to be little to no net job growth in the next two years,” said Michael Cohen, director of the Mayor’s Office of Economic and Workforce Development.
The proposal was just one of the plans Newsom is dangling before local business leaders to stimulate the economy. But while Newsom’s “talk straight” speech at a business-leaders breakfast Wednesday morning was big on tax cuts, he offered little in the way of increasing revenues for a city that is expected to have a $460 million budget shortfall next fiscal year.
Scott Hauge of Small Business California said that no matter how small the impact on businesses, it is important to prove San Francisco is business-friendly.
“The economic piece is important, but it’s more important to send a message that we’re looking to hire more employees,” he said.
The Mayor’s Office plans to introduce the payroll-tax exemption next week to the Board of Supervisors, which has been critical of Newsom for not supporting a June special election that would place tax-increase measures before voters. Board President David Chiu said he supports the exemption, which compliments his own legislation providing payroll-tax breaks to small businesses.
Supervisor John Avalos, who chairs the Board’s Budget and Finance Committee, said he thinks giving tax breaks at this time goes against the best interests of the government.
“I think it’s important that we really work hard to develop our economy and bring it back to life,” he said. “At the same time, we need to shore up our flagging government. We need to find revenue.”
Priming the pump
Mayor Gavin Newsom’s economic stimulus proposals include:
- Suspension of the payroll tax for businesses that hire new workers
- Offering tax credits on new equipment purchases — if the purchases are made locally
- A new program to provide an offset for small businesses that participate in Healthy San Francisco
- More than $23 million in no-interest loans for local businesses
- Expand the “Shop S.F. Get More” and “Staycation” campaigns to attract shoppers and tourists
- Expand state and federal tax-credit programs
- Source: Mayor’s Office
