S. F. voters approve sweeping overhaul of business taxes
A San Francisco ballot measure that approves sweeping business tax changes passed Tuesday night, with results including a large number of mailin ballots.
Proposition F passed 68% to 32%, with 80% of precincts reporting. The measure required a simple majority to pass.
Mayor London Breed and the Board of Supervisors sponsored the measure, which will eliminate the city’s payroll tax and gradually raise gross receipts tax rates by 40% for all industries. Officials have said the measure is critical to closing the city’s $ 1.5 billion budget deficit amid the coronavirus pandemic.
Some industries hit hard by the pandemic and related shutdowns will see temporary tax relief. Retail, service businesses, manufacturing, arts, entertainment and recreation, accommodations, and food services will see tax cuts in 2021 and 2022, before seeing rates increase in 2023.
The information sector, which includes many tech companies, will see an even higher tax rate that matches the professional, scientific and technical services industry. Information companies are currently taxed between 0.125% to 0.475% of gross receipts. They will be taxed 0.585% to 0.879% in 2024 under the measure and expected to pay $ 43 million more compared with 2020, according to the city’s Office of the Controller.
Small businesses will see additional benefits, with those making $ 2 million or less in gross receipts exempt from the tax, up from the current threshold of $ 1.17 million. Registration fees for businesses with $ 1 million or less in gross receipts would be roughly cut in half, but fees will increase for businesses with between $ 1 million and $ 2 million in gross receipts.
The measure will complete the city’s gradual transition away from payroll taxes, first approved by voters in 2012.
The Controller’s Office expects the measure to give a modest boost to the economy and help recover 3,444 jobs by 2025, with the elimination of the payroll tax giving companies an incentive to hire workers. The city is expected to lose 100,000 jobs this year due to the pandemic.
Prop. F will also unlock tax revenue from two 2018 voterapproved ballot measures,
June’s Proposition C tax on commercial rents and November’s Proposition C tax on gross receipts, that had been both delayed due to litigation. If the city loses the litigation, the gross receipts tax would increase for 20 years to mirror the two previous tax measures under Prop. F. In September, the state Supreme Court declined to hear the gross receipts tax litigation after a lower court ruled in the city’s favor, freeing around $ 492 million in collected money.
The San Francisco Labor Council, a labor union group, raised about $ 240,000 in support of Prop. F. The San Francisco Association of Realtors raised around $ 211,000 to oppose it.