Editorial: The business tax debacle


Labor and much of the progressive community worked with downtown and the Mayor's Office last year to craft a pension-reform bill that took away benefits from city employees. The unions came to the table, recognized the city's financial problems and bought into a compromise, even though it took money out of their pockets.

And now big business, with the support of Mayor Ed Lee, wants to reform the local business tax in a way that doesn't bring the city a dime of new revenue (and hurts small business in the process).

In other words, it's fine to seek compromise when it's about cutting workers pay and city costs. When it's about asking big business (and a lot of big businesses, particularly tech businesses, in this town are doing exceptionally well right now) to chip in just a little more, to do the right thing, address the revenue side of the ledger and pay a fair share, the answer is No.

That's not ok — and the supervisors shouldn't go along with it.

The essence of the proposal from the mayor's office (orchestrated in significant part by billionaire Ron Conway) is to shift the city's main business tax from a levy on payroll to a levy on gross receipts. There are winners and losers in that scenario, and the business community is split: High-tech firms tend to have high payrolls compared to gross receipts, and finance, insurance and real-estate tends to have high gross receipts compared to payroll. So the burden could shift from the likes of Twitter and Zynga, who would pay less, to the commercial office and financial-services sector, which would pay more. In other words, the new business elite likes the change, and the old guard doesn't.

Small business doesn't like it much, either — a lot of the tiniest companies in town now pay no tax at all, and would be hit with at the very least an annual license fee. So the percentage paid by the smallest would go up

You can certainly argue that tech is creating more jobs than other sectors of the economy these days. And while it's fun to watch the Chamber of Commerce and Conway's San Francisco Citizens for Technology and Innovation butt heads (and progressives are looking for ways to exploit those differences), the fight between Twitter and the Business Owners and Managers Association is a sideshow.

The real problem is that the mayor's plan would be revenue-neutral — that is, the big business community, which has never paid its fair share of the city's tax burden, would be doing nothing at all to help with the structural budget deficits that plague San Francisco. Labor gives up hundreds of millions of dollars. Neighborhoods suffer with service cuts. The poorest San Franciscans give up housing and health care and social services in the name of balancing the budget. And the wealthiest companies in town smirk and say: Sorry, we won't help. Screw you, buddy.

That's a nonstarter. A lawsuit by 52 big businesses over an earlier gross receipts tax, settled in 2001, cost the city as much as $50 million a year — and at the very least, this new tax should get that back. A plan that doesn't at the very least bring in $50 million to $100 million a year of additional revenue from the big operators — tech, finance, real-estate, and the rest — amounts to the proverbial shifting of deck chairs on the Titanic. If the mayor won't move, a grassroots alternative needs to be on the November ballot.