SF business community just opposes government

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Mayor Gavin Newsom and his business community allies often accuse progressive members of the Board of Supervisors of being too “ideological” in their proposals, particularly when they involve revenue or regulations. But a looming battle over reforming the city's business tax – one of three new revenues set for a special Budget & Finance Committee meeting tomorrow (7/9) at 11:30 am – shows that an ideological aversion to taxes of any kind drive Newsom and the business community more than their stated concern for “jobs” and the “economy.”

Board of Supervisors President David Chiu crafted his measure – which creates a progressive structure for the currently flat payroll taxes and uses small commercial rent tax to spread the tax burden among more businesses (only 10 percent of which now pay the payroll tax) -- specifically to decrease the business tax burden on small businesses and protect private sector jobs while also bringing in about $35 million more into the city, which will save some city jobs and thus help the local economy.

City Economist Ted Egan and the Office of Economic Analysis confirmed that Chiu's carefully crafted measure does just that, noting that it was based on recommendations made last month in a report by his office and two private accounting firms that was jointly commissioned by both Chiu and Newsom.

“The proposed legislation modifies the Progressive Payroll option in the Controller's report, to achieve greater revenue growth while minimizing private sector job growth,” concludes Egan's analysis. And that's the idea of this legislation, to save some city jobs and services without hurting the private sector. Egan found this tax reform would on balance have no impact on private sector jobs.

But the Small Business Commission, driven by anti-government zealots in their community, wants even greater concessions and to minimize government revenues, demands that Chiu is now considering giving in to, with sources close to the negotiations saying they will amend the plan to exempt more small businesses and lower the revenue projection to more like $28 million.

“There are members of the small business community that are averse to any taxes,” Regina Dick-Endrizzi, director of the city's Office of Small Business (which staffs the commission), told us.

She said the commission isn't opposing or supporting the measure, and while she said the business community isn't ideologically opposed to government, she did admit that “they are just not sensitive to keeping city workers employed.”

And that's a terribly selfish and self-defeating attitude that hurts the local economy and the services we all depend on. The problem is the small business community -- which is supported by the Bay Guardian and beloved by all as a key job creator -- is being used by conservative ideologues and large corporations and lured into joining their anti-government crusade. This has to change, and this legislation is a good opportunity to talk about the real ideological barriers that are hindering common sense solutions to this city's problems.

Comments

"The problem is the small business community -- which is supported by the Bay Guardian and beloved by all as a key job creator -- is being used by conservative ideologues and large corporations and lured into joining their anti-government crusade."

What exactly has the Guardian done for the small business community? What has any "progressive" outfit in this city done for small business, tax wise or any other way other than hot air?

And the Guardian complaining about "ideological barriers" is a hoot. Do you even read your own paper?

Posted by matlock on Jul. 09, 2010 @ 10:25 am

as long as it doesn't impact them - unlike the one Pete Wilson proposed in the 90s - which they VIGOROUSLY and VORCIFEROUSLY opposed.

Posted by Lucretia Snapples on Jul. 09, 2010 @ 1:32 pm

Really? the Small Business Community is "just not sensitive to keeping city workers employed"?

Well, then Lets start by dissolving the small business commission, small business assistance center and laying off that staff....

Sheesh-- the hypocrisy.

Posted by Guest on Jul. 09, 2010 @ 3:11 pm

As I understand it, one aspect of Chiu's proposal is that commercial landlords can pass the tax increase on to their tenants if the landlord collects $200,000 or more in rent from his building.

That threshold could mean added expense for many small retailers operating under already-slim margins. And in an increasingly competitive environment, it's not realistic to think that the merchants can pass on the additional expense by raising prices.

Perhaps you could clarify this and investigate the potential impact on small businesses in a future article.

Posted by Guest Hut Landon on Jul. 09, 2010 @ 3:50 pm

Unless the tenant is under a month-to month lease-- in which case it would only require a 30 or 60 day notice (or whatever state law requires for commercial tenancies) , landlords would have to re-negotiate their lease with the tenant to increase their rent.

Posted by Guest on Jul. 10, 2010 @ 5:41 am

have ways of passing on expenses built into them.

Where I work we pay part of the liability insurance and various taxes.

Posted by glen matlock on Jul. 10, 2010 @ 12:28 pm

All commercial leases have clauses that ensure increases in taxes and other common expenses are passed through to the tenants, meaning increased costs to the businesses in the building.

More taxes are not the answer, less $100,000 a year desk jobs are.

Posted by Guest on Jul. 16, 2010 @ 10:19 pm

I speak only for myself, but I am in communication with many members of the small business community. To me this is not a black and white issue and I do not feel that small business sees it that way. Until the recent crash in real estate values, every time a commercial property changed hands the buildings were reassessed at higher values and therefore the tax income from property had been climbing for at least a decade. Now we are in a different world where property values are decreasing and it is unlikely that there will be increases for several years. Our city, like the entire country, must make the adjustment.

Small business people do understand that a real estate tax is likely to be more equitable than the current payroll tax and would be open to hearing proposals to replace one with the other. We all should acknowledge that real estate taxes are usually passed through to the tenants and so this will be an additional burden on small business unless something is done to eliminate the payroll tax.

However, the problem is not simply revenue. The problem includes over spending. Even during times when there was an ever increasing tax base, the city was running a deficit. If the city continues to spend at its current rate the deficit will bankrupt San Francisco. Before small business can support tax increases, it needs to see some concessions about future spending.

Like it or not we live in a different world where the tax base could be depressed for a very long time. It is time to cut up the credit card before it is taken away from us. There must be ways of doing this while minimizing the impact to the people of San Francisco, but it does mean that everything needs to be on the table.

I feel that it is a gross mischaracterization of the small business community to lsay it "is being used by conservative ideologues and large corporations and lured into joining their anti-government crusade". Look at how many businesses have closed due to the recession. We are fighting for our survival, which includes the survival of our employees and their dependents. And we are all aware that more taxes are coming. They must.

Far more troubling to me is that local government seems to conspire to keep small business from having any input in the process. Information is withheld and hearings are held with as short notice as possible to prevent small business from being at the table.

I'd like to see a climate where the people of San Francisco can come to the table together and have tough discussions, work out problems and walk away feeling that we have accomplished something positive. However we find ourselves in a position where everyone is fighting for his/her own turf. I see it as a responsibilty of our city leaders to find the middle ground. Let's hope that local government and business can learn to work together to resolve these issues. I know this city can do it better if it tries.

Posted by Jerry Becerra on Jul. 09, 2010 @ 4:41 pm

City government can't run deficits, as you say here, Jerry. It can take on debt by issuing bonds, but its budgets must be balanced every year, just like a business. And just like a business, it can't continue making cuts every year without diminishing its services or exploiting its workers, so at some point it needs to find new sources of revenue. Instead of being honest about that and seeking new general taxes, Newsom and other city officials have been increasing all of the fees, which hurt small businesses and average citizens, while many of the largest corporations in town (banks, insurance companies, financial services, etc.) pay no taxes to the city (other than property taxes that have been kept artificially low by Prop. 13, thus starving the public sector). I'm glad to hear that you want to work with the city on this problem, Jerry, which is more than many in the business community have been willing to do.

Posted by steven on Jul. 12, 2010 @ 11:10 am

Everyone who works in the city has a payroll tax paid on them by their company.

Any assets the business accumulates are taxed as a property tax.

Anything the business buys in the city is taxed.

John Avalos wants to create a new tax on alcohol and call it a fee so as to use a "loophole" in prop 13.

Posted by matlock on Jul. 12, 2010 @ 3:43 pm

Small businesses are exempt from the payroll tax. The floor is, what 20 employees? This means that small business in San Francisco pays no business taxes on operations to the City.

For a sector of the economy that is largely exempt from paying to operate the city that provides the infrastructure upon which they base their businesses, they sure complain about taxes they won't pay.

-marc

Posted by marcos on Jul. 12, 2010 @ 5:34 pm

I refer to the comment by the author. You are correct, small businesses pay no payroll tax.

"while many of the largest corporations in town (banks, insurance companies, financial services, etc.) pay no taxes to the city (other than property taxes that have been kept artificially low by Prop. 13, thus starving the public sector)."

Posted by Guest on Jul. 12, 2010 @ 7:48 pm

I have spent a lot of time looking at David Chiu's proposal on behalf of numerous small business advocacy groups. I share Jerry's eloquently stated point of view and appreciate his call for collaborative efforts to fix our financial woes.

Posted by Bradley Vaccaro on Jul. 12, 2010 @ 11:41 am

the Small business community is "just not sensitive to keeping city workers employed."-- Really?

Why then are they not clamoring for dissolution of the Small Business Commission and the small business assistance center-- lay off that staff.. save money....\

\I'm just sayin'

Posted by Guest on Jul. 10, 2010 @ 5:37 am

commission, that person says its mostly useless. It also gets involved in all sorts of things having nothing to do with small business, and the lefty members are all just idiots.

Posted by glen matlock on Jul. 10, 2010 @ 12:26 pm

The thing to remember, Hut, is that Chiu's plan CUTS the payroll tax on many small merchants; in the end, it should be cost neutral or even beneficial. But big financial institutions, which now pay no city payroll tax at all, would have to pay at least something.

Posted by tim on Jul. 12, 2010 @ 3:47 pm

A link as to where I can find out about big financial institutions who don't pay payroll tax. Would these be institutions that only employ a few people in the city?

Even renters have to pay property taxes, which amazes my lefty coworkers when I showed them the bill. When I fill out the tax form for the cities payroll tax it requires that all paid work done in the city be taxed.

Posted by matlock on Jul. 12, 2010 @ 7:57 pm

The link to the Controller's Office report showing that only 10 percent of the buisnesses in SF, that 8,000 of 80,000 businesses, pay the payroll tax is here: http://co.sfgov.org/webreports/details.aspx?id=1138

That's why this report, prepared by fairly conservative economists, argues for spreading that tax burden around more businesses, which is good for small businesses and good for the city.

Posted by steven on Jul. 13, 2010 @ 9:34 am

OK, that is some of the dumbest shit ever. Here's the paragraph that seems important around this.

"There are several exemptions to the payroll tax. Under state
law, cities are not allowed to levy local taxes against
financial and insurance corporations, as they are taxed by
the State. Thus, the City receives no business tax revenue
from banks and many insurance companies that do business
in San Francisco. These businesses do pay a tax to the
State that other industries do not pay."

If this was solely addressed in some way I would likely vote for it.

Some of the other stuff in there was a bit much and would keep me from voting for some catch all across the board reworking. Like the six month bicycle trial Market Street that is still going, the city never gives up on anything stupid. Other than the culture bus of course.

Posted by matlock on Jul. 13, 2010 @ 3:47 pm

Stop the presses: Glen Matlock just agreed with something I wrote. Maybe there's hope for a new political consensus after all. Yes, Glen, the commercial rent tax is designed to tax these entities and other large corporations, one of the few ways of doing so because these powerful interests have made it legally very difficult for local governments to tax them. And Chiu designed the tax in a way that actually helps most small businesses. But the Chamber of Commerce and their allies are trying hard to kill this, precisely because it taxes their biggest members, using disingenuous anti-government appeals to maintain small business opposition and raise fears in the general populace that it will hurt the local economy.

Posted by steven on Jul. 14, 2010 @ 2:42 pm

The symbiotic relationship between elected flunkies and all the special interests annoys me, not just some special interests.

Posted by matlock on Jul. 16, 2010 @ 11:57 am