Seeking new thinking on taxes
In the early months of Mayor Ed Lee’s new term in office, San Francisco’s tech community is supporting his goal of turning our city into the innovation capital of the world. Like the city itself, the city’s economy thrives because of its diversity, not in spite of it. That’s why it is so important for the business community to work with city leaders on tax reform.
For more than a decade, San Francisco has been the only city in California to collect a payroll tax, which stems from a 2002 lawsuit by a coalition of San Francisco businesses who opposed what was an existing split roll tax. At that time, San Francisco businesses were required to pay whichever was higher — a payroll tax or a gross receipts tax — but the court deemed this unconstitutional.
Since that ruling, only 10 percent of San Francisco businesses have paid the payroll tax, which penalizes hiring. Many businesses believe that our collective tax responsibility needs to be more evenly distributed and thus the model must be shifted to tax output (gross receipts) as opposed to input (payroll).
Some businesses fear any change, which is why we are collaborating with the mayor, members of the Board of Supervisors and the city controller’s office to bring everyone to the table and reform our antiquated tax code.
Under a gross receipts system, which is common in many municipalities, hiring is encouraged and not penalized. Considering the growth of both new and existing industries in San Francisco, we need to support a tax system that empowers companies to hire and thrive.
At the same time, we must put protections in place for small businesses and entrepreneurs to take risks, develop new ideas and limit undue burdens on creating jobs in a new and evolving marketplace.
San Francisco’s economy is in transition. While financial services, real estate, retail, small businesses and health care continue to be its backbone, the tech industry is quickly becoming its major job creator. With more than 1,500 companies, the city’s tech industry will soon eclipse the record number of tech jobs created here more than a decade ago. Tech now employs more than 30,000 San Franciscans, a 60 percent increase since 2005, according to the New York Times.
Surging job growth is not the only benefit of San Francisco’s new high-tech economy. Blighted neighborhoods like Mid-Market and the Tenderloin are being revitalized as tech companies relocate, joining arts organizations and new businesses to transform struggling areas of our city. Technology entrepreneurs are planting roots locally, driving civic and philanthropic efforts that benefit all San Franciscans.
The 255-plus-member companies of the San Francisco Citizens Initiative for Technology and Innovation (sfciti) recognize that we in the tech community need to work with city’s other business sectors — commercial and residential real estate, construction, small business, financial services, manufacturing, retail and the hospitality and tourism industries — to find what is best for the city’s overall economy.
Together, we need to work to adopt city policies and practices to allow our diverse and innovative economy to thrive.
We do not have the answers, which is why we are reaching out to all sectors to put great minds together on the best ways to continue the revitalization of our local economy.
I encourage you to share your ideas and suggestions with the citizens initiative members. We have an opportunity to do something meaningful for San Francisco. In my experience, the best ideas come unexpectedly.
What we all want is a tax system that enables every business sector to grow and create jobs for our citizens. Let’s leave no stone unturned in finding a solution that is fair to all industries.