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Report: Tax measure would ‘likely reduce homelessness,’ cost some jobs

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Tenant advocates rally in support of both Proposition 10 and Proposition C across from the California State Building on Golden Gate Avenue on Monday, Sept. 24, 2018. (Kevin N. Hume/S.F. Examiner)

A tax measure on the November ballot targeting San Francisco’s largest businesses “will likely reduce homelessness,” a city report said Wednesday, but could cost the city up to 875 jobs over the next two decades.

The report, which characterized the economic impacts as “small” in the context of the larger economy, was seized upon by both sides of debate over Proposition C, a tax on businesses earning more than $50 million in gross receipts.

Those for the measure issued a statement titled, “Economic Report Shows Negligible Negative Job impact, Far Outweighed by Reduced Homelessness and Reduced City Costs.” They highlighted that the report found that “the expected reduction in the number of homeless people in San Francisco can be expected to improve physical and social conditions on the city’s streets.”

Those opposed to the measure issued a statement titled: “Controller’s Economic Impact Report Proves Prop C Will Have Severe Negative Economic Impact for San Francisco.”

SEE RELATED: Tang, Chamber of Commerce blast homeless tax measure at City Hall rally

The economic impact report was issued by City Controller’s chief economist Ted Egan Wednesday morning. It found that the “likely decline in homeless population” would reduce emergency costs and increase the “attractiveness of The City,” but these impacts were not quantified.

“To the extent that these policy objectives are achieved, the economic impact could be better than we project,” Egan said in the report.

The tax measure would result in The City having “725 to 875 fewer jobs in The City than there otherwise would be” over the next two decades and a loss of $200-$240 million in gross domestic product, the report said.

But “these impacts are small in the context of the city’s job market and economy, equal to a 0.1 percent difference, on average, over 20 years,” he wrote.

Opposition to the tax measure is being led by the Chamber of Commerce.

No on C campaign spokesperson Jess Montejano said in a statement Wednesday that “The report proves that there is no certainty whatsoever that outcomes to homelessness and street behavior will improve across San Francisco, if Prop C is approved.”

His statement also said that “the report highlights massive uncertainties for San Francisco’s economy and residents.”

The tax would apply to businesses with more than $50 million in San Francisco gross receipts, about 300 to 400.

Jennifer Friedenbach, executive director of the Coalition on Homelessness, who led the effort to place the measure on the ballot, said that “I hope the Chamber stops saying that it’s going to be a job loss.”

“Point one percent over 20 years is completely negligible. I don’t think that’s anything voters are going to be concerned with,” she said.

“Two industry sectors—Information and Financial Services—would pay nearly half of the tax, as the largest businesses in the city are concentrated in those industries,” the report found.

One possibility is that businesses may elect to move out of town to avoid the tax. Egan said a relocation is not included in the analysis. “To the extent that this relocation occurs, economic impacts could be more negative than we project,” the report said.

The measure, an average half percent gross receipts tax, would generate between $250 million and $300 million annually on top of what The City currently spends for homelessness services and housing support. It would go toward housing, mental health services, shelters, and rental assistance.

In Fiscal Year 2017-18, the City spent approximately $380 million on services related to homelessness.

The report notes that “along with other large cities on the West Coast, San Francisco’s homeless count has generally risen from 2007-2017, in the face of national declines.” However during that same time period, while other West Coast cities saw the homeless population grow by 38 percent, it grew “only by 7 percent in San Francisco” as The City has increased spending on services related to homelessness.

Friedenbach said they have the strategies to prevent homelessness in the first place and projects to house more homeless; all that is needed is the additional funding. “We are very confident this is going to make a very dramatic impact on the visibility of homelessness on the streets,” she said.

Those for the measure also highlighted that the tax would be imposed at a time when the federal government has reduced corporate incomes taxes on businesses. “While the tax savings to San Francisco businesses are difficult to estimate and apportion to the city, it is likely that the 14 percent income tax cut would outweigh the proposed 0.5 percent gross receipts tax increase for the majority of the 300-400 affected businesses,” the report said.

“This report shows that the big corporations who are funding the opposition to Prop C are still huge economic winners from the Trump Tax Giveaway even after this measure passes,” said Brian Bassinger, executive director of the AIDS Housing Alliance in a statement. “San Francisco expects more from its corporate leaders.”

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