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SF’s tech tax fails to make November ballot

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Protesters march down Market Street from Twitter headquarters to the offices of Uber during a rally against tax cuts for tech companies in San Francisco on Wednesday, July 20, 2016. (Ryan McNulty/Special to S.F. Examiner)

San Francisco’s short-lived tech tax proposal for the November ballot was officially scrapped Monday.

But The City remains seemingly as divided as ever over how to treat the technology industry.

The measure was killed in a 2-1 vote following a contentious Board of Supervisors Budget and Finance Committee hearing, which has become an all too common tenor at City Hall during the high-stakes election cycle this November when the fate of the board’s ideological majority hangs in the balance.

Calling attention to the controversial Twitter-tax break and commuter tech shuttlers, supporters of the measure argue that “big tech” should pay their “fair share” for impacts ranging from housing costs to evictions felt during the past five years.

Meanwhile, one opponent, Supervisor Mark Farrell, likened the proposal to Donald Trump politics and being un-American.

After accusing progressive supervisors of demonizing tech workers, Farrell, who chaired the board’s committee hearing Monday, refused to send the measure to the full board, despite calls from his progressive colleagues to do so.

Supervisor Eric Mar, who introduced the measure earlier this summer, admittedly didn’t have the votes to place it on the ballot – Tuesday is the deadline – in part because the ballot is already crowded.
But taxing the technology is also a politically thorny issue.

When the proposal was introduced in June, it immediately drew sharp criticism from business advocates and the technology sector. The measure would have imposed a 1.5 percent tax on the payroll of tech companies, on top of the existing gross receipts taxes paid. It also would have taxed stock options.

Since the proposal would have dedicated funds to pay for homeless services and affordable housing, a two-thirds majority was required for voter approval.

“I don’t think this is the solution. I think there is a problem,” said Supervisor Norman Yee, who is part of the progressive bloc.

In deference to Mar, Yee made a motion to send the measure to the full board with a recommendation for the board to reject it. But Farrell and Supervisor Katy Tang, the other two committee members, opposed that motion and instead voted to table the item, effectively killing it.

“I don’t believe in scapegoating one specific industry or one specific group of San Francisco. To me it’s un-American,” Farrell said. “The housing crisis …is not a result of this industry, it is due to a lack of planning.”

Farrell added, “As a city I don’t think we should subscribe to the politics of Donald Trump and the Republicans in saying certain people are not welcome here in San Francisco.”

But Mar objected to Farrell’s terminology. “I’ve never been associated with Donald Trump or called un-American before in my life,” Mar said.

He added that he and the coalition behind the proposal “are about building unity among communities.” The coalition included Jobs with Justice, Alliance of Californians for Community Empowerment, San Francisco Rising, Causa Justa and Coalition on Homelessness.

“Everybody in San Francisco and the Bay Area — while we welcome the jobs, while we have accommodated big tech in many ways – knows that there are a handful of billion-dollar plus companies that while they have brought jobs have had remarkable impacts on The City,” said Supervisor Aaron Peskin, who was one of the measure’s co-sponsors along with Supervisor David Campos.

Peskin also said the proposal has started an important conversation, noting there are “tech titans” with “outsized influence “ in City Hall – an apparent reference to angel investor Ron Conway, Mayor Ed Lee’s prominent backer – and that “it’s time for them to know that San Francisco and this Board of Supervisors is willing to undertake that conversation. I think that is very American.”

An economic impact report conducted by Ted Egan, the City Controller’s chief economist, warned of significant adverse impacts if the tax was imposed in a report issued Monday. The report suggests the proposed tech tax wouldn’t make housing more affordable — but rather less.

The report noted that the technology industry has become “such an important part of San Francisco’s economy” that the tax “would likely have a major impact on the future of the local economy, and city finances.” The report also predicted the tax “on average” would make housing less affordable because it would reduce earnings at the same time as it applied “downward pressure” on housing costs.

Mar, however, refuted the reports findings. He suggested the report failed to look at the benefits of affordable housing creation and housing those living on the streets.

The measure would have generated up to $140 million annually. Businesses with under $1 million in gross receipts would not have been impacted and would have had their business registration fees reduced for a total loss of city revenue of $5.3 million annually.

The debate, however, is far from over. Mar, who is termed out of office in December, said he plans on Tuesday to introduce the tech tax measure for a future election, and Mar or one of his colleagues is expected to introduce a resolution to create a business tax reform working group.

The working group would address the complaint from Alex Tourk, a lobbyist for sf.citi, a tech advocacy group founded by Conway with 1,100 tech company members. Tourk said he questioned “why there was zero outreach to any of these companies to have a dialogue about this proposal.”

Egan’s report did suggest a different tact other than a payroll tax, which some malign as a job killer. “If The City wishes to raise an additional $120 million in business tax revenue in 2018, it may be more straightforward to simply adjust the Gross Receipts Tax rates at that time,” the report said.

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