Business tax’s demise fixes nothing

A proposal to levy a new tax on The City’s largest businesses appears likely to be shelved, according to the measure’s sponsor, Supervisor

Aaron Peskin.

But the apparent turnaround is less a result of a sudden case of sympathy for The City’s business community, and more an example that even the Board of Supervisors knows when it is going too far.

Peskin recently proposed a 0.1 percent tax on a business’ gross receipts, on top of the current payroll tax that requires companies to pay The City 1.5 percent of its payroll. The measure would have applied to businesses grossing more than $2 million a year, about 12 percent of companies in The City, and was expected to generate an extra $55 million a year for perpetually cash-strapped City Hall.

The plan was forcefully opposed by most business organizations in town, especially since it came amid several other proposals to add fee burdens to businesses. The most prominent such proposal is the funding mandate being pushed by Supervisor Tom Ammiano and now supported by Mayor Gavin Newsom to pay for health care access for the uninsured.

In the plan as it currently stands, companies with 20 to 99 workers would pay $182.50 per month for each full-time employee, while businesses with 100 or more workers would pay an average of $273 a month per worker.

Business groups, which did not have a say in the initial creation of the plan and were forced to do the best they could in amending it, have pointed out that the additional thousands of dollars per month businesses would have to pay would obliterate whatever profit margin many of them had, leading to the prospect of companies closing up shop or having to lay off employees. A City Controller’s Office report affirmed that small businesses would be hardest hit by the proposed legislation.

Peskin, in hinting he was ready to drop his gross-receipts tax plan, acknowledged that the new burden being placed on businesses through the health care plan made it a bad time to add yet another levy in the form of his plan, which he termed “not ready for prime time.”

While businesses are exhaling at the news that they might dodge at least one bullet, it is hardly a time to celebrate. And they take little consolation in the fact that Mayor Gavin Newsom thinks the new healthcare fee structure is not “onerous.” He might receive disagreement from the small-business owner who must now find a few thousand extra dollars a month, or the customers who will see prices rise as merchants try to defray the expense by passing the costs along.

While the apparent demise of the gross-receipts tax is welcome news, much more needs to be done to treat businesses fairly in San Francisco. City Hall, with its $5 billion budget, still finds it all too tempting to tap businesses when funds are needed for its projects rather than come up with the money from existing funds.