A proposed 1.5 percent payroll tax on technology companies was shot down Monday at the Board of Supervisors’ Budget and Finance Committee. (Ryan McNulty/Special to S.F. Examiner)

No effort to build consensus on tech tax

Earlier this week the “tech tax” — a proposed 1.5 percent payroll tax on technology companies — rightly met its demise in the Board of Supervisors’ Budget and Finance Committee. However, despite the committee voting against it, supporters say they are still committed to bringing it back. Supervisor Eric Mar said he will continue to push for a fair-share tech tax. Advocates rallied on the steps of City Hall, saying they plan to collect signatures for a future ballot. But as they continue to push this forward, it’s imperative that the business community is involved.

Until now, there has been a complete lack of outreach by Supervisor Mar and his co-authors to either employer organizations or the individual employers that would pay the tax. If this measure — or any tax measure on the business community — is to succeed, it needs real outreach and engagement as previous successful measures have shown.

In 2011 and 2012, the mayor, members of the Board of Supervisors and the City Controller met with business, labor and civic groups to discuss reforming The City’s business tax system. By a unanimous vote, and with the agreement of all the participants in that six-month process, the Board of Supervisors placed on the November 2012 ballot a measure for a revenue neutral transition from a payroll tax to a gross receipts tax. The measure also increased, for the first time in decades, the business license fee structure for all businesses, raising more than $27 million in new revenues for the General Fund.

The official ballot argument in favor of Proposition E stated: “San Francisco’s current business payroll tax is fundamentally unfair because it is a tax on jobs instead of a tax on sales or profits. That means now, every time a local business hires a new employee its taxes increase — a huge disincentive to creating new jobs in San Francisco.” This ballot argument was signed by the mayor and every member of the Board of Supervisors, including Supervisor Mar. The voters overwhelmingly supported the “Don’t Tax Jobs” argument with a 71 percent “yes” vote for Prop. E.

Changes made to the payroll tax in 2011, such as eliminating stock compensation from the tax and the ongoing transition to the gross receipts tax, have had a positive impact on both job growth and tax collections. While the growth in technology accounts for only about 25 percent of new jobs in The City, it has fueled growth in every sector, with 60,000 new jobs and a 6 percent drop in unemployment since 2010. Tax revenues from businesses have grown in four years, from $450 million to a projected $670 million in the current budget year — a 50 percent increase.

It was clear at Monday’s hearing that Supervisor Mar took the time to organize testimony in support of his measure. What he failed to do was reach out to the very people that would have to pay the tax. To attempt to undo the consensus that was reached through months of hard work in 2012 was wrong. To try and do it without outreach is indefensible.

In order to avoid this unacceptable process, the Board of Supervisors needs to consider a rule for tax measures that would require a longer period from introduction to board calendaring, multiple public hearings and outreach to impacted tax payers by the author in conjunction with the controller and tax collector.

If we can’t rely on supervisors to engage with the key parties to build consensus, then we must change the rules by which tax measures are submitted to the ballot, giving major stakeholders a real chance to be heard.

Jim Lazarus is the senior vice president of public policy at the San Francisco Chamber of Commerce.

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