San Francisco voters will have a chance this November to make changes to the way businesses are taxed that will give a break to more small businesses and eventually generate $100 million annually in additional revenue.
The Board of Supervisors voted unanimously Tuesday to place on the Nov. 3 ballot a measure that would do away with what remains of The City’s payroll tax and rely fully on a tax on a business’s gross receipts — a transition that began in 2012. The measure also increases rates over time in certain sectors, like tech and real estate, to boost revenues as The City faces budget deficit years.
Some sectors hardest hit by the COVID-19 pandemic will see a tax break in the initial years, including hotels and restaurants.
The proposal is the result of months of discussion with board members, Mayor London Breed, labor leaders and business advocates. Breed supports the measure.
Board President Norman Yee called it “a long overdue reform of our tax system.”
“Recovery must start from the bottom up,” Yee said. “We need to provide immediate relief to the hardest hit industries and businesses and also provide a responsible sustainable funding source for our future.”
The measure also has a mechanism to allow The City to start spending revenue from two 2018 voter-approved tax measures for childcare and homeless services tied up in litigation. The City Controller has impounded the revenues in case The City loses the legal challenge, but the measure has a tax that goes into effect if they do lose, which allows for the release of the already collected revenue.
Small businesses are exempted from paying the current business tax if they earn $1 million or less in gross receipts. The measure increases the exemption to small businesses who earn $2 million or less in gross receipts.
Supervisor Aaron Peskin called the measure “a remarkably fair package.”
Voters approved a measure in 2012 to transition away from a payroll tax to a gross receipts tax, but Peskin said the way the rates were tailored gave Big Tech a “tax holiday” that this measure would immediately fix by raising their rates to match other sectors like financial services.
“Frankly, it gave Information Services, commonly known as Big Tech, a tax holiday that they have enjoyed now for almost a decade,” Peskin said.
Also Tuesday, the board voted unanimously to place another tax measure on the ballot that would tax businesses whose CEO’ s earn 100 or more times than the median earnings of their workers.
The measure, introduced by Supervisor Matt Haney, is expected to generate between $60 million and $140 million a year, by applying the levy to a businesses gross receipts. It would go into effect in 2022.
“Big companies that short their workers but pay their executives multi-million-dollar salaries can afford to pay their fair share in taxes,” Haney said in a statement. “And we’re going to put those resources to good use by hiring thousands of health care workers that this city needs to get us through the pandemic.”
Meanwhile, Supervisor Gordon Mar announced his support of the gross receipts tax measure and withdrew his proposed November ballot measure to tax a business on the amount of stock compensation paid to their workers. He had introduced the measure last year as well and also withdrew it then.
Mar said that he worked with his colleagues “on a comprehensive progressive revenue strategy” and that they achieved those aims without his measure.
“We sought to raise up to $150 million per year through the Stock Compensation Tax, and we’ll raise that revenue and more through this suite of other measures,” Mar said. “This is about working together for a fairer economy, a more balanced business tax framework, and to meet the needs of our city, so I’ve withdrawn this measure in support of the greater whole and comprehensive strategy.”
Business advocates had called for a reduction in the number of tax proposals on the ballot.
In other business, the board unanimously approved in a second and final vote the Golden State Warriors’ plans to build a new hotel, condo and retail complex next door to its Chase Center arena in Mission Bay. The 129 room hotel complex includes about 20,000-square feet of retail and 21 condominiums on the top floors with views of the Bay. The Warriors plan to break ground next year and complete the project in 2023.