Tax equity

With the business community divided, can labor and progressives force a business-tax reform that actually increases revenue?

SEIU workers staged a massive rally on April 18 as part their campaign calling for downtown to pay more taxes,

A broad consensus in San Francisco supports reforming the city's business-tax structure by replacing the payroll tax with a gross receipts tax through a November ballot measure. But the devil is in the details of how individual tax bills are affected, which has divided the business community and given a coalition of labor and progressives the opportunity to overcome the insistence by Mayor Ed Lee and other pro-business moderates that any change be revenue-neutral.

Service Employees International Union Local 1021, San Francisco's biggest city employee union, last month launched a campaign demanding that the measure increase city revenue, setting a goal of at least $50 million, which represents the amount the city has lost annually since 2001 when 52 large downtown corporations sued to overturn the last gross receipts tax. The union is threatening to place a rival measure on the fall ballot.

"This call for it to be revenue-neutral didn't make a lot of sense given all the reductions in city services in recent years," said Chris Daly, the union's interim political director. "It's fair to at least get the money back that we lost in 2001."

The union and the city recently agreed on a new contract that avoids more of the salary cuts that SEIU members have taken in recent years, but workers could still face layoffs under a new city budget that Lee is scheduled to introduce June 1. Lee, Board of Supervisors President David Chiu, and business leaders working on the tax-reform proposal have until June 12 to introduce their ballot measure.

But they don't yet have an agreement on what the measure should look like — largely because the technology sector (led by billionaire venture capitalist Ron Conway, the biggest fundraiser for Lee's mayoral campaign last year), the traditional businesses represented by the San Francisco Chamber of Commerce, and the small business community are pushing different interests and priorities.

"The technology industry has to realize they have a tax obligation like any member of the business community does," Jim Lazarus, the Chamber's vice president for public policy, told us.

Conway is reportedly using his influence on Lee to push for a model that keeps taxes low for tech companies — even if that comes at the expense of other economic sectors, such as commercial real estate and big construction firms, which will likely see their tax obligations increase. Yet some Chamber counter-proposals could end up costing small businesses more money, creating a puzzle that has yet to be worked out.

But one thing is clear: The business leaders don't want to see overall city revenue increase. "If there's anything that is unifying in the business community is that it's revenue neutral," small business advocate Scott Hauge told us. "We're not going to increase revenues, that's just a given, so if we have to do battle then so be it."

SEIU and other members of progressive revenue coalition that has been strategizing in recent weeks are hoping to exploit the divisions in the business community and arrive at a compromise that increases revenue, and if not then they say they're willing to go to the ballot with a rival measure.

"We're working on trying to recover what we lost in the 2001 settlement and then some," Sup. John Avalos, who has been working with the progressive coalition, told us. "We have to have something going to the ballot that is revenue generating."




For labor and progressives, this is an equity issue. Workers have been asked to give back money, year after year, despite the fact that big corporations have been doing well in recent years but haven't contributed any of that wealth to the cash-strapped city. Labor leaders say that after they supported last year's pension-reform measure, it's time for the business community to support city services.

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