S.F. vot­ers may see 5 tax hike mea­sures on Novem­ber bal­lot.

Mea­sures to test at­ti­tudes to­ward re­ces­sion, big busi­nesses

San Francisco Chronicle - - FRONT PAGE - By J.K. Di­neen

San Francisco vot­ers could be weigh­ing as many as five tax hike mea­sures this fall, in what will be a test of how the corona virus­fu­eled re­ces­sion in­flu­ences at­ti­tude son eco­nomic growth and whether the city’s big busi­nesses are pay­ing their fair share.

Four of the five tax­in­crease pro­pos­als — which have been placed on the Novem­ber bal­lot but could still be with­drawn up un­til the end of July — were rooted in the PRE­COVID days of 2019 when the city was flush with cash, the ho­tels were packed with busi­ness trav­el­ers, un­em­ploy­ment was about 2% and the growth of tech com­pa­nies seemed lim­it­less.

Now the city faces a dra­mat­i­cally dif­fer­ent eco­nomic land­scape: a $1.5 bil­lion deficit over the next two years, 12.6% un­em­ploy­ment and the flight of thou­sands of tech work­ers, many of whom are leav­ing the high­priced Bay Area to work re­motely from more af­ford­able lo­ca­tions.

While pro­busi­ness groups ar­gue that the cur­rent health and eco­nomic cri­sis is ex­actly the wrong time to in­tro­duce new taxes, mem­bers of the pro­gres­sive-dom­i­nated Board of Su­per­vi­sors say the city will need the ad­di­tional rev­enue to con­tinue pro­vid­ing es­sen­tial ser­vices.

“We are in a cri­sis where we are go­ing to have (blown) a hole in our es­sen­tial health re­sponse sys­tem un­less we ask some com­pa­nies to help out a lit­tle more,” said Su­per­vi­sor Matt Haney. “And th­ese com­pa­nies can pay a lit­tle bit more. Th­ese com­pa­nies spend that much on lunch.”

Haney, along with Su­per­vi­sor Hil­lary Ro­nen, is be­hind one of the three rev­enue mea­sures: a tax on CEOS earn­ing at least 100 times the me­dian in­come of their av­er­age worker. The tax could ap­ply to com­pa­nies such as Wells Fargo, Visa, Gap Inc., Com­cast, Bank of Amer­ica, JP Mor­gan and

Chipo­tle, ac­cord­ing to Chron­i­cle re­search and the city’s chief econ­o­mist, Ted Egan.

It would raise as much as $140 mil­lion an­nu­ally.

An­other mea­sure, by Su­per­vi­sor Gor­don Mar, would put a 1.12% pay­roll tax on stock­based com­pen­sa­tion and is ex­pected to raise $50 mil­lion to $150 mil­lion. It would ap­ply to any pub­lic com­pany that is­sues stock op­tions or other equity grants to its em­ploy­ees.

A third, by Su­per­vi­sor Dean Pre­ston, would dou­ble the trans­fer tax from about 3% to 6% for res­i­den­tial and commercial prop­er­ties sold for more than $10 mil­lion. Some of the rev­enue from that mea­sure would go to help com­pen­sate small land­lords who were un­able to col­lect rent be­cause their ten­ants lost in­come be­cause of the coro­n­avirus.

The fourth and fifth mea­sures, the most com­pre­hen­sive and com­pli­cated, are two com­pet­ing pro­pos­als to over­haul the city’s gross re­ceipts tax, one by Mayor Lon­don Breed and the other by the Board of Su­per­vi­sors. Both pro­pos­als would sim­plify the tax code and elim­i­nate what re­mains of the city’s pay­roll tax, which was meant to be phased out over sev­eral years but has lin­gered be­cause the gross re­ceipts tax did not raise enough money.

And both ver­sions would un­lock money from Propo­si­tion C, the 2018 suc­cess­ful bal­lot mea­sure tax­ing big busi­ness to fund home­less­ness pro­grams. While the city has been col­lect­ing the Prop. C money, it has not been able to spend it be­cause of a law­suit over the mea­sure’s mar­gin of vic­tory. Both gross re­ceipts tax re­forms would give com­pa­nies a tax break if they agree to let the city keep the Prop. C money, even if the courts strike down the mea­sure and or­der the funds to be re­paid. Prop. C has been bring­ing in $250 mil­lion to $300 mil­lion an­nu­ally.

The dif­fer­ence is that Breed’s pro­posal “con­tains no sig­nif­i­cant tax in­creases,” while the board ver­sion would gen­er­ate about $181 mil­lion a year in ad­di­tional tax rev­enue.

Busi­ness lead­ers are giv­ing all the pro­posed tax in­creases a thumbs down. Jay Chang of the San Francisco Cham­ber of Com­merce said the board’s ver­sion of the gross re­ceipts tax would pun­ish low­mar­gin busi­nesses that have lower pay­roll but high gross re­ceipts. Th­ese in­dus­tries in­clude ho­tels, restau­rants, auto deal­er­ships and gro­cery stores.

“Of course I’m against it,” said Sal Qaqun­dah, who owns Ar­guello Mar­ket, a small gro­cery store in the Rich­mond District. “Ev­ery time you turn around, there is a new tax.”

Un­der the pro­posal, ho­tels would pay an es­ti­mated 13% more.

Kevin Car­roll, ex­ec­u­tive di­rec­tor of the Ho­tel Coun­cil of San Francisco, said the taxes would make it harder to re­open the in­dus­try, which — be­fore the pan­demic — em­ployed 24,000 work­ers and paid $440 mil­lion a year in room rate taxes.

“Our in­dus­try is al­ready dev­as­tated be­cause of COVID,” he said. “Any new taxes or ad­di­tional costs would keep us from hir­ing back our em­ploy­ees. For our in­dus­try, even sug­gest­ing new taxes doesn’t make sense. If any­thing we should be look­ing at ways to re­duce taxes.”

Jen­nifer Sto­jkovic, ex­ec­u­tive di­rec­tor of tech ad­vo­cacy group sf.citi, said it’s not a good time to add taxes “while we are fac­ing the real pos­si­bil­ity of an ex­o­dus of the tech in­dus­try in San Francisco.”

“Adding a whole bunch of taxes all at once when we are in the mid­dle of mas­sive lay­offs is the wrong di­rec­tion to go in,” Sto­jkovic said. “We want to fo­cus on eco­nomic re­cov­ery. How are we sup­posed to re­cover if we are get­ting hit with new taxes at the bal­lot ev­ery six months?”

San Francisco com­pa­nies that have an­nounced ma­jor lay­offs in­clude Uber, Airbnb, Lyft, Zen­e­fits, Eventbrite, Lend­ing Club and Son­der.

Still, it’s un­clear how many of th­ese mea­sures will ac­tu­ally end up on the bal­lot. Su­per­vi­sors of­ten put mea­sures on the bal­lot early in the sum­mer as bar­gain­ing chips, and the stock­based com­pen­sa­tion may play that role, ac­cord­ing to City Hall ob­servers. Ei­ther the mayor or the su­per­vi­sors push­ing the higher rev­enue­gen­er­at­ing ver­sion of the gross­re­ceipts tax could agree to pull their mea­sure in ex­change for changes to the other mea­sures.

Haney said that “no­body wants to see two com­pet­ing gross re­ceipt mea­sures on the bal­lot” and that he is con­vinced a com­pro­mise will be struck. Mar de­nied that the stock com­pen­sa­tion mea­sure is a bar­gain­ing chip, adding that it’s “a good pro­posal and has the sup­port of the pub­lic and my col­leagues.”

Jason Mc­daniel, an as­so­ciate pro­fes­sor of po­lit­i­cal science at San Francisco State Univer­sity, said the po­lit­i­cal cli­mate fa­vors pop­ulist taxes that squeeze more money from big busi­ness. After a decade­long boom that has made San Francisco the most ex­pen­sive city in the coun­try, it will be tough to make most city vot­ers sym­pa­thize with large cor­po­ra­tions that are sud­denly suf­fer­ing, he said.

“All the en­ergy would be with pro­gres­sives on this right now,” he said. “I don’t think the fis­cal fu­ture of big busi­ness is some­thing peo­ple are wor­ried about. It’s about pro­tect­ing small busi­ness, health care, teach­ers, the com­mu­nity.”

Jim Stearns, a vet­eran pro­gres­sive po­lit­i­cal op­er­a­tive, said the taxes are all neatly crafted in such a way that they tar­get a nar­row group of wealthy busi­nesses and in­di­vid­u­als and not av­er­age renters or home­own­ers.

“It is ab­so­lutely clear from ev­ery poll I’ve done that peo­ple re­ally want to tax the wealthy,” he said. “Peo­ple are livid about the gross dis­par­ity in wealth. They are get­ting un­em­ploy­ment, or still wait­ing to get un­em­ploy­ment, and won­der­ing how they are go­ing to pay their rent. And then they see that Jeff Be­zos made $5 bil­lion dur­ing the pan­demic.” The Ama­zon CEO’S net worth has ac­tu­ally in­creased by more than $50 bil­lion since the shel­ter­in­place or­ders went into ef­fect.

Lau­rie Thomas, a restau­rant owner who is ex­ec­u­tive di­rec­tor of the Golden Gate Restau­rant As­so­ci­a­tion, said the sit­u­a­tion is more nu­anced and urged the board to hold off on new taxes un­til the fall­out from the coro­n­avirus is bet­ter un­der­stood.

“We have a hurt­ing city right now,” she said. “Many of us have had to lay off our work­ers. Own­ers have not taken com­pen­sa­tion, have not been able to pay their bills. We have all had to rad­i­cally re­think how we do busi­ness. I don’t think a tax in­crease in any sec­tor is go­ing to be help­ful.”

Nina Rig­gio / Spe­cial to The Chron­i­cle

Sal Qaqun­dah, long­time owner of Ar­guello Mar­ket in San Francisco’s Rich­mond District, could be speak­ing for many busi­ness own­ers when he says, “Ev­ery time you turn around, there is a new tax.”

Yalonda M. James / The Chron­i­cle

Su­per­vi­sor Matt Haney says that, with the city in a cri­sis, more money is needed from com­pa­nies that “spend that much on lunch.”

Nina Rig­gio / Spe­cial to The Chron­i­cle

Ar­guello Mar­ket’s Sal Qaqun­dah, with em­ployee Xan­dra Gon­za­lez, op­poses new busi­ness taxes.

Paul Chinn / The Chron­i­cle 2019

Su­per­vi­sor Gor­don Mar’s pro­posed bal­lot mea­sure would add a 1.12% pay­roll tax on some stock­based com­pen­sa­tion.

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