monopoly_money.jpgA tax on stock options in San Francisco will be eliminated if a proposal introduced at today’s Board of Supervisors meeting is approved.

The proposal, introduced by Supervisor Mark Farrell, is the latest effort by city officials to tweak or eliminate taxes that they say are causing businesses to consider leaving San Francisco or reject the idea of starting them in the city.

Earlier at today’s board meeting, supervisors gave final approval to a payroll tax exemption for Twitter and other businesses that move to certain areas of the city’s Mid-Market and Tenderloin neighborhoods.

Twitter, the microblogging company currently based in the city’s South of Market neighborhood, had considered moving down the Peninsula to a city that has no payroll tax.

San Francisco’s payroll tax, the only one of its kind in the state, levies the tax on any company with a payroll above $250,000.

According to Farrell, another one of the city’s taxes–this one on stock options–is the only one of its kind in the country.

Farrell introduced a proposal today to permanently end the tax on stock options, which he said disproportionately harms the city’s tech companies, which often offer stock options as a form of compensation because they can become lucrative once a company goes public and sells stock.

Supervisor Ross Mirkarimi had proposed last month a two-year moratorium on the stock options tax, but Farrell said that would just delay a problem that needs addressing now.

Farrell said compensation through stock options “is the way tech companies operate” and “how they retain and attract new employees.”

Farrell, who has a background as an investment banker and venture capitalist, was one of a handful of supervisors that met with Mayor Ed Lee and leaders of some top tech companies at the first meeting of the newly formed Technology Council at City Hall on Monday.

Farrell said the message from the companies was clear, that “they won’t and can’t continue in San Francisco” if the stock options tax remains.

Supervisor John Avalos was one of three supervisors who voted against the payroll tax exemption for Twitter and other companies. Avalos said the tax exemption would erode confidence in the city’s business tax and could lead to many more companies asking for similar tax breaks.

Despite his opposition to the payroll tax exemption, Avalos said he remained open to considering Farrell’s proposal on stock options.

“He knows the industry well … so I want to hear more” about the proposal, Avalos said.

Dan McMenamin, Bay City News

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