San Francisco voters might be weighing as many as 5 tax hike measures this fall, in what shall be a take a look at of how the coronavirus-fueled recession influences attitudes on financial development and whether or not the town’s large companies are paying their justifiable share.
4 of the 5 tax-increase proposals — which have been positioned on the November poll however might nonetheless be withdrawn up till the top of July — had been rooted within the pre-COVID days of 2019 when the town was flush with cash, the lodges had been filled with enterprise vacationers, unemployment was about 2% and the expansion of tech firms appeared limitless.
Now the town faces a dramatically totally different financial panorama: a $1.5 billion deficit over the following two years, 12.6% unemployment and the flight of hundreds of tech employees, a lot of whom are leaving the high-priced Bay Space to work remotely from extra reasonably priced places.
Whereas pro-business teams argue that the present well being and financial disaster is precisely the mistaken time to introduce new taxes, members of the progressive-dominated Board of Supervisors say the town will want the extra income to proceed offering important companies.
“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,” mentioned Supervisor Matt Haney. “And these companies can pay a little bit more. These companies spend that much on lunch.”
Haney, together with Supervisor Hillary Ronen, is behind one of many three income measures: a tax on CEOs incomes at the very least 100 instances the median earnings of their common employee. The tax might apply to firms corresponding to Wells Fargo, Visa, Hole Inc., Comcast, Bank of America, JP Morgan and Chipotle, in response to Chronicle analysis and the town’s chief economist, Ted Egan.
It could increase as a lot as $140 million yearly.
One other measure, by Supervisor Gordon Mar, would put a 1.12% payroll tax on stock-based compensation and is anticipated to boost $50 million to $150 million. It could apply to any public firm that points stock choices or different fairness grants to its staff.
A 3rd, by Supervisor Dean Preston, would double the switch tax from about 3% to six% for residential and industrial properties bought for greater than $10 million. A few of the income from that measure would go to assist compensate small landlords who had been unable to gather hire as a result of their tenants misplaced earnings due to coronavirus.
The fourth and fifth measures, probably the most complete and sophisticated, are two competing proposals to overtake the town’s gross receipts tax, one by Mayor London Breed and the opposite by the Board of Supervisors. Each proposals would simplify the tax code and remove what stays of the town’s payroll tax, which was meant to be phased out over a number of years however has lingered as a result of the gross receipts tax didn’t increase sufficient cash.
And each variations would unlock cash from Proposition C, the 2018 profitable poll measure taxing large enterprise to fund homelessness applications. Whereas the town has been amassing the Prop. C cash, it has not been in a position to spend it due to a lawsuit over the measure’s margin of victory. Each gross receipts tax reforms would give firms a tax break if they comply with let the town hold the Prop. C cash, even when the courts strike down the measure and order the funds to be repaid. Prop. C has been bringing in $250 million to $300 million yearly.
The distinction is that Breed’s proposal “contains no significant tax increases,” whereas the board model would generate about $181 million a 12 months in further tax income.
Enterprise leaders are giving all of the proposed tax will increase a thumbs down. Jay Chang of the San Francisco Chamber of Commerce mentioned the board’s model of the gross receipts tax would punish low-margin companies which have decrease payroll however excessive gross receipts. These industries embrace lodges, eating places, auto dealerships and grocery shops.
“Of course I’m against it,” mentioned Sal Qaqundah, who owns Arguello Market, a small grocery retailer within the Richmond District. “Every time you turn around, there is a new tax.”
Below the proposal, lodges would pay an estimated 13% extra.
Kevin Carroll, govt director of the Lodge Council of San Francisco, mentioned the taxes would make it tougher to reopen the business, which — earlier than the pandemic — employed 24,000 employees and paid $440 million a 12 months in room charge taxes.
“Our industry is already devastated because of COVID,” he mentioned. “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, govt director of tech advocacy group sf.citi, mentioned it’s not a very good time so as 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 mentioned. “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 firms which have introduced main layoffs embrace Uber, Airbnb, Lyft, Zenefits, Eventbrite, Lending Membership and Sonder.
Nonetheless, it’s unclear what number of of those measures will truly find yourself on the poll. Supervisors typically put measures on the poll early in the summertime as bargaining chips, and the stock-based compensation may play that function, in response to Metropolis Corridor observers. Both the mayor or the supervisors pushing the upper revenue-generating model of the gross-receipts tax might agree to drag their measure in exchange for modifications to the opposite measures.
Haney mentioned that “nobody wants to see two competing gross receipt measures on the ballot” and that he’s satisfied a compromise shall be struck. Mar denied that the stock compensation measure is a bargaining chip, including that it’s “a good proposal and has the support of the public and my colleagues.”
Jason McDaniel, an affiliate professor of political science at San Francisco State College, mentioned the political local weather favors populist taxes that squeeze extra money from large enterprise. After a decade-long increase that has made San Francisco the costliest metropolis within the nation, it is going to be powerful to make most metropolis voters sympathize with giant companies which might be abruptly struggling, he mentioned.
“All the energy would be with progressives on this right now,” he mentioned. “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, mentioned the taxes are all neatly crafted in such a approach that they aim a slender group of rich companies and people and never common renters or owners.
“It is absolutely clear from every poll I’ve done that people really want to tax the wealthy,” he mentioned. “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 internet worth has truly elevated by greater than $50 billion for the reason that shelter-in-place orders went into impact.
Laurie Thomas, a restaurant proprietor who’s govt director of the Golden Gate Restaurant Affiliation, mentioned the scenario is extra nuanced and urged the board to carry off on new taxes till the fallout from the coronavirus is healthier understood.
“We have a hurting city right now,” she mentioned. “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.”
J.Okay. Dineen is a San Francisco Chronicle employees author. E-mail: [email protected] Twitter: @sfjkdineen