More San Francisco companies wonder why Twitter's tax break would be exclusive

Ryan Gilbert is no stranger to taking a tech startup from its infancy to its big payday. After selling his Oakland-based online-payment company, PropertyBridge, for $28 million, he decided to try it again, this time in San Francisco.

“When I was running the company in Oakland, I was always hearing how I should go to San Francisco,” Gilbert said. “That’s where all the talent is.”

So Gilbert made the move and now runs BillFloat, a Financial District-based company that has grown from two to 20 employees. He put up with San Francisco’s unique payroll tax, along with all the other expenses, but when he heard City Hall was offering a break on those taxes to Twitter, he became angry.

“If San Francisco is serious about retaining high-growth startups and stimulating economic activity, they should offer incentives to all,” Gilbert said.

Supervisor Jane Kim, along with Mayor Ed Lee, is advocating for the passage of legislation that would give Twitter a six-year payroll tax break — exempting newly hired employees from the 1.5 percent levy — if it decides to move into the historic San Francisco Mart building at Market and Ninth streets. The tax break would apply to all qualifying businesses that relocate to the portion of the Tenderloin and the mid-Market Street area that city officials hope to revitalize.

Gilbert represents a growing chorus of companies that see the tax break as unfair. Many, including gaming company Zynga, are already locked into leases elsewhere and cannot make the move.

The small-business community is really split on this, said Scott Hauge, the director of Small Business California. After polling member businesses, many responded with concerns about the fairness of a tax break for a successful large company while others are excluded because of geography.

“The flip side is that we recognize that it’s an area that needs considerable economic development,” Hauge said.

And while the San Francisco Chamber of Commerce has not received negative responses about the payroll tax break, there is a push to expand it for new hires citywide, according to chamber President Steve Falk. Such a break could help stimulate job growth during the recession.

“We would prefer to do something like this citywide, but better that we do it in a geographic area of town than to not do it at all,” Falk said.

The Board of Supervisors Budget and Finance Committee is expected to vote on the tax break legislation Wednesday.

Cash flow

San Francisco’s payroll tax is a hot topic.

1.5% City’s payroll tax

9,000 Businesses tax applies to (payroll of more than $250,000)

$345 million Revenue tax generated in 2010

Source: Controller’s Office

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