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SF considers local income tax proposal

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Looking in through the gates of a house on Billionaires Row on Broadway Street. San Francisco is considering an income tax on millionaires, if it can get the state’s cooperation. (Cindy Chew/2010 S.F. Examiner)

A “millionaire’s tax” may be San Francisco’s best answer to addressing financial uncertainty and income inequality.

As The City faces budget deficits and a widening wealth gap, a half-percent tax on incomes more than $1 million, for example, could generate nearly $62 million annually, according to the City Controller’s Office.

Taxing millionaires may also sound a whole lot better to voters who last year soundly defeated a sales-tax hike to fund transit and homeless services. The revenue boost would come in handy should President Donald Trump follow through on his threat to cut federal funding for sanctuary cities like San Francisco.

But there’s one major problem. State law prevents local cities like San Francisco from taxing income.

Assemblymember Phil Ting, D-San Francisco, however, is working on a bill in Sacramento with Supervisor Aaron Peskin that would change that. Peskin is also supporting Ting’s effort with a pending board resolution that was approved Wednesday by the Board of Supervisors Government and Audit Committee urging Sacramento to change the tax law.

Ting said in a statement Wednesday to the San Francisco Examiner that the language of the bill is still being worked on but it would enable “San Francisco alone to pursue a local income tax.”

“If enacted into law, this bill will give The City options to protect services as Republicans in Washington strive to take them away from us,” Ting said. “There is a lot of work ahead to get such a bill passed and signed. We need to get buy-in from a lot of people, especially the governor.”

While Peskin along with Supervisor Jane Kim voted to support the resolution, which would show political support, the initiative was opposed by board President London Breed, the third committee member. The resolution, which is before the full board for a vote next week, would also direct The City’s lobbyist to advocate for the proposal in Sacramento.

Peskin and Kim argued that a local income tax could raise vital revenues and combat income inequality.

Breed, however, cast doubt on the success of the effort. “I just don’t see this happening,” Breed said.

She added, “I am just not really a fan of local income tax. I just can’t get with this.”

Breed then suggested that City Hall crack down on wasteful spending before taxing more. “With our current revenues there is a lack of accountability on so many different levels. Part of our role should also be to look at how we are spending money now and where is the accountability for those who receive money from The City, from the departments that waste money.”

But Kim countered that how The City spends public tax money and the need to raise more money are two separate discussions. She also said that when Breed supported the regressive sales tax hike last year — both Peskin and Kim did not — “there was not a discussion of whether we spent our existing dollars wisely.”

Kim said that taxation is not just about raising money for services and capital needs but also about equity. “We are just going to see a continued exacerbation of the wealth and income gap.”

Peskin also spoke to inequality. “This would be a great way — if it would come to pass — to address our growing income inequality here in San Francisco, which is rivaling Rwanda.”

In 2003, then-Assemblymember Mark Leno unsuccessfully attempted to allow for a local income tax to fund public safety and capital improvements. The Los Angeles County Board of Supervisors tried to convince lawmakers last year to grant local power to impose a “millionaire’s tax” to fund homeless services, which also proved unsuccessful.

Peskin has the votes to pass the resolution. In addition to Kim, supervisors Sandra Fewer, Hillary Ronen, Norman Yee, Ahsha Safai and Malia Cohen, who chairs the board’s Budget and Finance Committee, are co-sponsors.

The idea of local income taxes is not a new one. There are 11 states with cities that have a local income tax. If Ting’s bill succeeds, ultimately, it would be up to the voters to approve an income tax in San Francisco.

“If Columbus, Ohio, can do it, so can we,” Peskin said.

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