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Public Policy Newsletter Article

San Francisco Mayor London Breed, Supervisors Introduce Various Business Tax Measures

  • 2020-06-18T15:00:00.000+0000
  • Bay Area
  • Author: Melanie Cohn

Facing a growing budget shortfall partially due to the COVID-19 pandemic, the San Francisco Board of Supervisors and Mayor London Breed introduced various business tax measures on June 16th.

Mayor Breed introduced her overall gross receipts tax measure, both through the legislative process and directly to the November ballot using her Mayoral signature (meaning there are two copies of the ballot measure moving through different pathways to the ballot). The measure would:

Unlock approximately $300 million collected as a result of tax increases from Proposition C ballot measures in June and November of 2018. These funds haven’t been spent due to legal challenges. A backup tax would be created to refund the amounts that have been collected via the ballot measures should the city lose the lawsuits related to them.

Eliminate the payroll tax and replace it with a gross receipts tax increase.

Reduce business taxes for small businesses.

Reduce business taxes for “sensitive industries,” including life science.

Supervisor Norman Yee introduced an overall business tax measure from the Board of Supervisors as a counterpoint to Mayor Breed's proposal. While Breed and the board agree on the broad contours of a plan for reform, they have not yet agreed on how much to increase the gross receipts tax rate, or how quickly to raise it. Both the mayor and the board agree an increase is necessary, but Breed is aiming for a smaller, more gradual rise to reduce the pressures on businesses already impacted by the pandemic. Supervisors are looking to raise rates more quickly to bring in as much money as possible. The mayor and Supervisors will seek to negotiate a compromise measure in the coming months.

Additional tax proposals for the ballot that were introduced on the 16th include Supervisor Mar’s IPO Tax (Stock Based Compensation Tax), a new parcel tax to fund SFUSD and public teacher salaries introduced by Mayor Breed and Supervisor Safai, and Supervisor Haney’s “Overpaid Executive Gross Receipts Tax.”

The IPO Tax would levy an additional 1.12% payroll tax on stock-based compensation. It would apply to any public company that issues stock options to its employees. That means companies that have already gone public would be taxed under this measure, but the extent depends on various factors, like how many employees have already exercised their stock options.

Supervisor Haney’s measure was previously introduced as the CEO tax to fund mental health services in San Francisco. The increase in gross receipts tax would be progressive, equal to 0.1 percent of taxable gross receipts for an executive – or group of executives – earning between 100 to 200 times more than their average employee. The levy would rise to 0.2 percent for those earning 200 to 300 percent more than their workers and up to 1 percent for those earning 900 to 1000 times their median salary of employees.

Finally, on a non-tax note, Mayor London Breed has also introduced a ballot measure that will bring zoning reforms and permit streamlining to support small businesses, especially those with storefronts.