The San Francisco Board of Supervisors Tuesday unanimously decided to put a measure on the November ballot to overhaul the city’s business tax.
The measure seeks to replace San Francisco’s 1.5 percent payroll tax, which charges companies for adding new employees, with a gross receipts tax that would charge the annual revenue of the company.
If approved by a majority of voters in November, the new tax would be phased in over five years starting in 2014 while the payroll tax is phased out over the same period.
The measure has the support of Mayor Ed Lee as well as many of the city’s business and labor leaders, some of whom joined the mayor to laud the proposal at a news conference on the steps of City Hall prior to the supervisors’ vote.
“We wanted to make a change to create more jobs,” said Lee, who has said the payroll tax, the only one of its kind in the state, penalizes job creation.
City officials estimate the new tax will create an additional 1,700 jobs annually.
Steve Falk, president of the San Francisco Chamber of Commerce, said “It’s not very often you hear a chamber of commerce talk positively about business taxes, but this is a very positive change and it will create jobs.”
Business leaders “insisted from the very start that a business tax be broad-based, fair and equitable,” Falk said. “We need to broaden the base and make sure the tax doesn’t punish any particular business.”
At the board’s meeting this afternoon, Supervisor John Avalos said the measure “is going to hold up to the test of time,” and noted it exempts small businesses with gross receipts below $1 million annually.
Supervisor David Campos was less enthusiastic, pointing out that the nearly 90 percent increase in companies paying a business tax under the measure could be “disproportionately impacting small businesses.”
Campos said, “We have to be very mindful as we go forward.”
San Francisco used a hybrid tax system in the 1970s and 1980s that allowed businesses to pay either its payroll or gross receipts tax, whichever was higher, but the system was eliminated in the 1990s after a similar setup in Los Angeles was ruled unconstitutional.
Dan McMenamin, Bay City News