Why payroll tax breaks are stupid


Jeez, the folks at BeyondChron are so enamored of mid-Market payroll tax breaks you'd think they were getting one themselves. (But since nonprofits don't pay the city's business tax, maybe Randy Shaw doesn't understand how it works.) Paul Hogarth, using a term typically employed by the Chamber of Commerce, call the tax a "job killer:"

Rather than taxing company profits or their net worth, the payroll tax is calculated on how many people they employ – which by definition makes it a “job-killer” for business that are hoping to expand.

And David Chiu told us he thinks we need to "reform the business tax. The payroll tax is a job killer."

Now: I agree, we need to reform the business tax. We strongly supported Chiu's proposal to replace the payroll tax with a gross receipts tax and a commercial rent tax (even though the Guardian is a commercial landlord and would have to pay that tax). It's much more fair.

But this talk of the payroll tax being a "job killer" -- and Twitter's threat to leave town unless the company gets a tax break -- boggles my mind. The payroll tax is a tiny, miniscule part of a San Francisco company's expenses. I help run a small business in San Francisco. I have to make hiring decisions based on (tight) budgets, and I've had to do it for more than 20 years. And I can tell you, the payroll tax was never even remotely an issue. It's not a "job killer;" compared to all the other factors involved in hiring in the city, it's nothing, peanuts, birdseed.

Here's how I explained it last time we had this discussion:

Say you're a biotech company that wants to hire a new entry-level worker at a modest $35,000 a year. Can you afford it? Let's cost it out.

There's the salary, of course. Then there's the 7.5 percent you're paying in federal Social Security tax. That's $2,626 more. And since you're in San Francisco, you're paying for health insurance; that's probably between $2,000 and $4,000 a year, depending on the plan, but let's peg it at the city's minimum mandate, which is $1.09 an hour, or $2,267.

So now your $35,000 worker costs $39,893. Then there's unemployment and disability insurance and workers' compensation. The person's going to need a desk and a chair, or a lab bench and a stool (and they have to be ergonomically correct), and probably a computer, a phone line, and software. And you're going to have to spend some money on training. You're going to offer a couple weeks of paid vacation, right? And you have to give sick days. So you have to account for the money you're spending to cover your new worker when he or she isn't working. If it all pencils out at less than $42,000, you're doing well.

Oh, wait, I forgot — there's the damn city payroll tax. That job-killing factor that could make the difference between hiring and not hiring. Better account for that; it could be a deal breaker.

Are you holding your breath? Ready for the ax to fall? Here you go: the payroll tax on your new hire is a whopping $525 a year. About $10 a week. You probably spent more on the help wanted ads.

Twitter wants a cap on the payroll tax for new employees, and that's supposed to be the make-or-break factor that determines whether the company will stay here. Honestly? If that's really true, then the folks at Twitter need some help in the accounting department, fast.

Again, my previous analysis:

Payroll tax data is confidential, but it's not hard to make rough estimates. Twitter has abut 350 employees now, and if they make an average of, say, $70,000 a year (reasonable in a high-tech firm), then the company payroll is about $24.5 million a year, and the city's 1.5 percent tax comes to $294,000.

Even if Twitter doubles its workforce, the amount it would save with the city's proposed tax break is only about $300,000 a year (the cost of two or three high-end employees out of the 350 the company wants to hire). If Twitter moves into the 200,000-square-foot space it's eyeing in Brisbane (sharing an office, reports say, with Walmart — how cutting edge!) and pays $25 a square foot in rent (probably low for nice office space), rent alone will be $8 million a year. Then there's the cost of all those workers driving (or taking a private bus) to a location badly served by transit. The payroll tax liability in San Francisco is tiny in comparison.

Twitter would probably be paying more for the moving vans to haul its gear to Brisbane than the payroll tax it's going to save. If it follows the likes of Genentech and Google and pays for fancy buses to transport its employees, the cost will make the payroll tax seem cheap. And if Chiu's reforms ever become law, and there's a commercial rent tax, and Twitter's landlord passes it on to the tenants (likely), then guess what? Twitter's taxes are going to be way higher anyway.

That's why I think this is bullshit. It's got nothing to do with Jane Kim or Randy Shaw or any of his political garbage. It's simple economics. Twitter is jacking up the city for a tax break that will cost San Francisco money -- but won't be even a teensy weensy factor in job creation.

The reason this matters: Corporations constantly demand tax breaks from cities. And every time a city gives in (and let's remember: the mid-Market tax break plan didn't start with a need to help small businesses in the Uptown Tenderloin; it came from Twitter's threats to move to Brisbane) then it opens the door for more blackmail. And if we're going to make deals with these folks, let's at least be be honest about it.

Again: If Twitter really, honestly thinks this tax break will make it more financially feasible to stay in the city -- with all the other factors involved -- then the bean counters there need to take a refresher course in Bean Counting 101. Tax breaks of this sort don't create jobs; never have, never will. That's the real lie we're dealing with. 



that makes it appear to be a trivial amount of money. Express it as a percent of turnover or revenue, or on a per minute basis, and it suddenly sounds low. But that's dangerous talk. A lot of little laxes can take as much out of a business as one large tax.

And there are a lot of other taxes a business pays - property tax, corporation tax, licenses and so on.

Ultimately, Twitter, or any other company is a customer for a service - location. This city is competing with other cities and counties for their business. It makes sense for us to try and compete with San Mateo, Santa Clara, Alameda etc. on price.

Even with a lowered payroll tax, the City will gain a lot from having hundreds of well-paid jobs in a rundown part of town. And that really is worth spending some money on.

Oh, and a gross receipts tax or "rent tax" is DOA. Not gonna happen.

Posted by Rick on Feb. 11, 2011 @ 10:38 am

Even if Twitter wouldn't be saving much money, there's a "psychic" effect of giving a payroll tax break.

The payroll tax only applies to businesses with a payroll of over $250,000 -- which if you think about it, actually includes many small businesses. A small business that hires five people making $50,000 per year (and with the cost-of-living in San Francisco, that's not too unreasonable of a guess) would have to start paying a payroll tax.

Businesses are literally afraid of hiring more people -- for fear of being hit with the payroll tax. Even if, as you demonstrate, the taxes are negligible economically, it's more of a psychological impact.

Posted by Paul Hogarth on Feb. 11, 2011 @ 11:15 am

Hey Paul, what's the psychological impact of shilling for the business community while continuing to call yourself a progressive? I think cognitive dissonance theory explains a lot about how you and Randy are behaving these days and why you're lashing out so stridently at us. Psychologist, heal thyself.

Posted by steven on Feb. 11, 2011 @ 3:57 pm

Paul you are just going to look sillier and sillier defending Jane Kim's votes over the next four years. Rather lap doggish?

Posted by Guest on Feb. 11, 2011 @ 6:56 pm

continues to vote on a case-by-case basis rather than voting a slate or idelogy, then she is doing a greater service to her constituents than being a lapdog to the left.

The voters rejected the appalling Debra Walker who would of course have been a totally predictable vote for everything left.

Instead we actually have someone who can think for themselves. Bravo.

Posted by Rick on Feb. 11, 2011 @ 7:09 pm

The idea that businesses (especially big ones like Twitter) are going to make fiscal decisions based on 'psychology' is absolutely laughable.

Businesses make decisions based on -one- thing; the bottom line.

Twitter's extortive gambit to win this tax break is simply one more cynical move among myriad that all big corporations perpetrate over and over again, year after year, to gradually hack away at taxes in a death-of-a-thousand-cuts strategy, until those taxes are gone. Every cut shifts their budget balances a little higher into the black and that suits them just fine.

This is the modus operandi of nearly every corporation operating within the hyper-competitive capitalist paradigm that currently runs our planet. And it is the job of our progressive leaders to resist, and then reverse, all of those cuts; and eventually phase out neo-liberal capitalism itself.

Posted by Eric Brooks on Feb. 12, 2011 @ 3:01 pm

Okay, if we decided to eliminate the minimum wage in SF, or the health-care mandate, that would save businesses some real money. Bad idea, I'm against it, but it would be real. The payroll tax? Any business person who thinks that he or she can't hire someone because of a $500 payroll tax is living in such a fantasy land that it's far beyond psychology. Why not offer Twitter something real, like direct investment in the neighborhood's infrastructure, transit, broadband, that sort of thing that would benefit everyone?

I don't think the CFO of Twitter is making a huge location decison on the basis of a psychological impact.

There's also, of course, a psychological impact to giving tax breaks to big businesses. It make me crazy, anyway. Not that my insanity is any big news.


Posted by tim on Feb. 11, 2011 @ 11:25 am

This isn't about the money at all. In fact, you admit that it's not much money - that was your entire point.

You're just in favor of any tax or tax hike. It's really that simple. That's about as complex and nuanced as your ideology gets.

The city will get ZERO payroll tax from Twitter is they move. But will get far more in sales and other tax revenues if they stay.

Think of the tax break as an investment with a very high return. And not as opportunity for a kneejerk liberal fit of outrage. See? You feel better already, don't you?

Posted by Rick on Feb. 11, 2011 @ 11:39 am

Rick is "just against any tax or tax hike. It's really that simple. That's about as complex and nuanced as your ideology gets". Because he thinks everyone is exactly like he is, anyone that disagrees with his ideology must be the same, only the "left wing version of it".

Twitter's tax dodge doesn't bring in more money, it costs SF money--the infrastructure that their employees take advantage of but don't pay for still costs the same.

See, here's the deal, Rick--it doesn't matter how vigorously you fellate the wealthy--they ain't never letting you in their club. And the more fellating you do, the more they expect and it costs YOU not them dearly.

Look at Ireland.

Have a nice day.

Posted by guest on Feb. 11, 2011 @ 12:03 pm

benefit the city?

What infrastructure is needed for them if they're not here?

If I gave you twenty bucks for every dollar you give me, for whom would that be a bad deal?

Posted by Rick on Feb. 11, 2011 @ 1:41 pm

The well paved Market St? SF doesn't spend on infrastructure, thats a red herring, we hear complaints about taxing for infrastructure and then the city just sets fire to the money.

You do understand that people live in the city, it seems that the progressives ideology is that we are all here to support the government and it's union employees.

all part of the anti-individual, pro-government agenda of the progressives.

Posted by matlock on Feb. 11, 2011 @ 1:46 pm

Rick says, "The city will get ZERO payroll tax from Twitter is they move. But will get far more in sales and other tax revenues if they stay."

This is the problem when advocates jockey for an outcome and use whatever argument sounds good, however false. A company like Twitter collects zero sales tax for us - they don't sell "tangble personal property" (clothes, furniture, restaurant meals, etc.), and therefore there is no sales tax. So, that argument of Rick's is totally bogus.

More importantly, the alst thing SF or the Bay Area needs is more jobs. Rents and housing prices are already unaffordable to 80% of us who don't make $100,000 a year working at Google, Facebook, Apple, HP, Intel, Twitter, Oracle, biotech companies, and all of the other high-tech companies and their attendent lawyers and financiers who make the money machines roll. Instead we should be telling these companies to relaocte out of San Francisco, relocate out of the Bay Area and relocate out of California and take their toxic jobs with them that cause the rest of us to pay high housing and prices and high taxes.

Rents have increased in SF and the Bay Area by 30-50% over the past 10-15 years, yet most of our incomes have increased more like 10-20% over the same period. No wonder many of us are paying 50% of our gross income on rent.

Scratch the surface of most supervisors and local politicians and I'll bet you discover a fair number of them come from families that own rental property (the financial elites of the elite who get all sorts of government subsidies), or have been involved with a TIC (the worst of the worst since TIC's permanently destroy rent control housing units), or get a fair amount of political donations from the real estate industry (developers, investors, realtors, financiers, real estate lawyers, etc.).

San Francisco has always been about real estate - thousands upon thousands of people have become multi-millionaires investing in SF real estate and building large-scale development projects that bring millions of dollars of revenue to countless others.

San Francisco is one of the top cities in the world for paying billions of dollars of rent each year to the wealthiest individuals and corporations in the world. The Democratic Party will make sure these ayments continue to increase to these wealthy elite and ensure that the city pays out hundreds of millions more of itnerest paymetns to the wealthy elites.

Doesn't Jane Kim support bond financing so that local residents and businesses can pay even more interest income to the wealthy elites? Now she wants ot subsidize high paying Twitter jobs so that SF housing rents can continue to skyrocket and to ensure a steady rental stream to a multi-millionaire building owner? This is Democratic Party politics 101. Just follow the money to see who wins in the local Democratic Party controlled cities - the big landlords and the wealthy bondholders. Rents and interest - the preferred income streams of the financial elites.

Posted by Guest on Feb. 11, 2011 @ 8:55 pm

Actually, I'm not a fan of all taxes. I dislike sales taxes, which are regressive. I think we ought to reform the tax code to charge more to those who can afford to pay. And I honestly can't believe that any remotely rational corporate executive would actually move a big operation out of SF purely because of a very small payroll tax.

Posted by tim redmond on Feb. 11, 2011 @ 11:54 am

So adding in "the cost of moving to Brisbane" is not a realistic part of this argument.

Tax breaks for businesses, as has been shown with biotech in Mission Bay, can be quite effective in having businesses take a look at areas they previously would have ignored. I can tell you from first-hand knowledge that the city's efforts to lure biotech into Mission Bay using tax breaks and concerted efforts on the part of the mayor and other city leaders have played a large part in the decision of companies to pick SF-Mission Bay over South San Francisco. It's undeniable. With those jobs come people's decision to live in the city, pay rent or buy here, shop here etc...

That being said Tim makes a valid point in his worry over the "race to the bottom." Where does it end? Rio Rancho in New Mexico ran into this exact problem with extravagant tax breaks to lure in Intel and then found themselves without the tax base necessary to service the new infrastructure needed for the facilities the company built outside Albuquerque. There has to be a balance. On par it doesn't seem like Twitter is going to push us over the edge were SF to grant them this exemption. You have to weigh cost and benefit and overall this seems like a good deal for mid-Market and San Francisco.

Posted by Lucretia Snapples on Feb. 11, 2011 @ 12:31 pm

The owner of Furniture Mart was very active with the Mid-Market Redevelopment rezoning effort. One of the goals of that redevelopment effort among many of the large Mid-market landlords was to rezone office space uses to high-end condos. The increase in land value would be worth multi, multi-millions with the stroke of a pen.

Now, apparently there's more money to be made renting to high-tech companies who have valuable stock to give to landlords - that costs nothing to Twitter except the paper it's printed on and they get a business deduction for it! Somethimes those cheap pieces of paper called stock can make a landlord millions, and those millions may escape taxes forever with a smart tax accountant, which most big landlords employ by the dozens.

But why is the city encouraging a more rapid gentrification of mid-Market when so many other areas of the city have gentrified so quickly?

Just in the past 15 years - and most of it within the last 10 years when the "progressives" have controlled the Board of Supervisors - we have seen area after area in the city gentrify with rents going up 200%, and sometimes 300%. The lower Haight. Most of the north and mid-Mission. SOMA. NOPA. Noe Valley.

In most cases large percentages of people of color have been displaced for the new residients of highly paid techsters and the supplementary lawyers and fianciers who keep their companies humming and the profits flowing. The lower Haight was a solid middle class African-American neighborhood. The north and mid-Mission were probably 90% Hispanic just 15 years ago. Anyone walked down Mission St. from 18th to 24th recently? Or walked 24th between Valencia and Potrero? The cool tech hipsters drawn to these areas are helping make their companies millions and their landlords millions, but making life more and more expensive for the rest of us.

Even without any Twitter subsidies, the mid-market area has already gentrified, so why do we need to encourage it faster? The SOMA Grand on Mission near 7th St. added a couple hundred high-end condos. The massive building project at Market and 8th will be adding almost 2,000 market rate rental units. Other large projects are either approved or on the drawing boards for the mid-Market area between 5th and 12th.

It's disturbing that progressive politicians and so-called progressive mouthpieces like Beyond Chron continue to push for gentrifying policies that give subsidies to multi-millionaire landlords and billion dollar campanies like Twitter while adding upward pressure on residential rents.

Five years ago Twitter was a mere business plan. Now we hear Google and Facebok are talking about a $5-6 billion purchase price. And Twitter doesn't want to pay any local tax becasue they're so cool? Or because a few crumbs from those multi-billions might be a good source of campaign contributions? Or because it's the nature of insiders like politicians and Beyond Chron employees to love to wheel and deal, to get the thrill of adrenaline and spike of testosterone being in the same room as the multi-millionaires and billionaires?

Posted by Guest on Feb. 11, 2011 @ 10:12 pm

Cuz I'm not, but I believe I'm corrrect in saying that Twitter could also deduct the cost of local payroll taxes from its federal taxes. That's a business expense, just like moving.

I'm for concerted efforts on the part of the mayor to lure businesses. I also think the proximity to the UC campus was a big factor. In fact, that's way more important than the biotech tax breaks. And any honest biotech executive would tell you that.


Posted by tim on Feb. 11, 2011 @ 1:49 pm

Really? I didn't know that.

But I can probably drive to UCSF Mission Bay campus quickler from Brisbane than from Mid-Market.

And without the smell of stale urine and vomit as well.

Posted by Rick on Feb. 11, 2011 @ 2:16 pm

But that's beside point.

Listen Tim, you're convinced you're right, as are everyone who works for the Guardian staff. You're uninterested in hearing evidence which directly contradicts your opinion on any matter - you never admit you're wrong or that solutions, much like life, evolve with time. The phrase "regressive progressive" applies perfectly to yourself, Steven, Daly and the whole staff at the Guardian - just pretend like everything has one easy answer and it'll all turn out OK. Isn't that the very definition of conservatism?

Your lack of experience and familiarity with the biotech industry is vividly illustrated by your last comment. How would you know what "any honest biotech executive" thinks?

As Randy said in his editorial (which of course, you were quick to jump to the bait to) "It must be lonely in that foxhole." Indeed it must be - constantly jousting with lions of one's own imagination.

Posted by Lucretia Snapples on Feb. 11, 2011 @ 3:43 pm

Lucretia says, "Taxes aren't an expense." Gee, where do these people come from. Do they think all of us who read this rag website are totally stupid? Of course local taxes are deductible on a company's state and federal tax returns. When you figure the fed tax rate of 35%,plus the state's tax rate of 9-10%, you can assume that about 50% of any local tax is subsidized by the federal government. Thus a company pays only 50% of the tax.

What's the current payroll tax? 1.5%? So, on a $100,000 salary, the tax is $1,500, and after the tax us deducted on Twitter's and every other local compay's tax return the cost is abot .75%, or $750 per $100,000 of payroll. Compared to the 10% of payroll taxes the comapny pays to the feds and state for FICA taxes, SSI taxes, UI taxes, SDI taxes, etc. - or about $10,000 per $100,000 of salary - the $750 paid to the city for MUNI polce, fire, parks, and all fo the other amenneties of San Francisco seems pretty small to me.

Where are we finding these cheapskate employers like Twitter and why are our local politicians even talking to them?

If they don't want to pay taxes here because they don't think SF is worth it, let them go to Mountain View or Brisbane or Nevada or Oregon. We don't need loser businesses that are looking for handouts and subsidies. And let's hope they take a bunch of other local businesses with them like Apple, Oracle, HP, Facebook, Google, Yahoo and all of the other tech companies that have destroyed our standard of living here in the Bay Area - at least for those of us who don't make $100,000 a year.

Posted by Guest on Feb. 11, 2011 @ 9:07 pm

Seriously. I thought fire protection, police, local public transport and parks were not "amenneties" but something residents of any city or municipality in CA expected as part of the social contract.

This statement takes the cake: "let's hope they take a bunch of other local businesses with them like Apple, Oracle, HP, Facebook, Google, Yahoo and all of the other tech companies."

Yeah, "let's" hope that. Without that reservoir of talent the Bay Area could depend on businesses like the Guardian and local government to take their place.

The blatant envy of commenters like the one quoted above is incredible. Don't hate 'cause you got in too late.

Posted by Lucretia Snapples on Feb. 12, 2011 @ 12:14 am

When you can't argue the merits, you resort to saying I'm a closed-minded idiot. Whatever.

Let me repeat the invite I offered to Matlock: Why don't you come on our sfbg radio show? Johnny and I would love to have you on to argue this stuff with us. Lose the fake name and let's talk. You can reach me at the Guardian at 255-3100.

Posted by tim on Feb. 11, 2011 @ 4:37 pm

decide the place and situation for the debate.

But why not something more neutral?

Formal debating rules. Neutral location. Pre-agreed motion. Impartial audience.

And if you lose by the popular vote of the audience, you admit that in writing in the next issue of the SFBG that you were wrong.


Posted by Rick on Feb. 11, 2011 @ 6:47 pm

He's been beatin you guys up in here- I would listen to that debate..!

Posted by Flowers on Feb. 11, 2011 @ 9:46 pm

In principle, the Beyond crowd seems right on the payroll tax cut. Yes, the tax cut would make little sense if the City were offering the cut and Twitter were staying in the same building. The purpose though is to revitalize a blighted area where Twitter could serve as a sort of an anchor tenant. Makes a lot of sense- not perfect sense.
(Pains to agree with the Beyond cowards who don't allow comments on their site.)

But Mr. Redmond is correct that the tax cut is relatively insignificant in the decision tree here. Much larger considerations for example, are the lease and tenant improvement deal Twitter can cut with the Landlord and the ability to maintain employees in Brisbane versus a mid-Market location. But maybe you have to look at such a tax break as analagous to buying a car. It's like when you are right on the brink of cutting the deal and at the end the salesman says, "and I'll throw in the custom floor mats for free."
However, it doesn't quite jibe to say the payroll tax cut in absolute dollars is insignificant but the loss in revenues to the City budget is significant.

Posted by Flowers on Feb. 11, 2011 @ 10:25 pm

Yep, once again the narrow view is taken that a tax break for a "big" business is BAAADDD! As Mr. Redmond so adroitly pointed out, the actual payroll tax break is an insignificant amount in the operating costs of a business like Twitter - so one can only imagine that in terms of the City's multi-billion dollar budget it is barely a pimple on a pimple. BUT, the much larger picture is having a business like Twitter, and the employees it brings, located in our City as opposed to Brisbane, buying a latte, buying lunch, maybe getting some dry cleaning done, riding public transportation (we're a "transit first" City after all), having dinner after work with friends, and ultimately wanting to own a home here so they could eliminate that commute... gee, the revenue that would get recycled thru the City and the additional service sector jobs needed to support a business like Twitter, kind of makes the projected $300,000 Tim's whining about the City giving away seem like the more insignificant number.
Jobs... that's what the City needs, and jobs located in the City will drive the economy in only one direction and that is up. Anything that is limiting to the creation of jobs or increased payroll simply reduces the ultimate total revenue the City will realize, and that translates to continued budget shortfalls and reductions in services.
Time to pull our head out of the sand and look forward to what will benefit the City as a whole as opposed to this continued idealogical dialog that takes the short view that we need money now to support services, when what we need is revenue over the long term.

Posted by GuestJim on Feb. 12, 2011 @ 12:18 am

The payroll tax IS a job killer because it taxes something that we wish to encourage, job creation. One aspect of fiscal policy as broader public policy is that government can tax things that it does not desire and give tax breaks to things that it does desire.

There has been consensus across the political divide in San Francisco to transition from a narrow payroll tax to a broader based business tax since the mayor's race in 2003. The only issue is in the nuts and bolts of how the tax will be crafted for businesses with different margins.

If David Chiu has wanted for the gross receipts or rent tax to pass last year, then he would have done his homework and made sure that the Small Business Commission and the Board of Supervisor's appointed "Commish" would have voted to support the measure.

No matter what David Chiu or Jane Kim does, Randy Shaw and his eviction attorney Paul "how many seniors did you throw into homelessness?" Hogarth will cheer wildly from the sidelines via their taxpayer subsidized propaganda organ.

But the SBC did not support the measure and that is why it did not make the ballot. Given that David Chiu has no identifiable political groundings to speak of, is a totally transactional politician, it is difficult to say whether or not a subsequent measure will make the ballot. That all depends on the circumstances of the moment and how it impacts Chiu's efforts to move to the next square on the game board.

Part of this has to do with the desire of elected officials to attend lavish dot.com parties in close proximity to City Hall. Any tax break ordinance should be amended to make it official misconduct for any elected official to attend any party or social function at any recipient of said tax break.

The City faces myriad problems. There are choices we make in how we solve those problems. I want someone in office who puts the interests of San Franciscans before those of billionaires, their corporations, their yacht races and developers and those hypothetical San Franciscans who might some day live in the crappy new housing they build.

If the "ideology" of "taking positions" on "issues" that put the interests of the voters and residents before those of the already wealthy is predictable and divisive, than so be it. I call that democracy of the sovereigns free of corporate dominance.


Posted by marcos on Feb. 12, 2011 @ 9:11 am

Please: If the payroll tax is a "job killer" then a gross receipts tax would be a "sales killer." Wow, I better not sell any more products; I'll jut get taxed on my gross receipts! It's like saying the income tax is an employment killer -- why should I get a job if I'm just going to have to pay taxes on my income? Only the true loonies think that really makes sense.

The payroll tax is a blunt instrument, a rough, not terribly accurate way to tax a company based on its size. I prefer a gross receipts tax -- but I bet Twitter would want some exemption from that, too. Or would want to say that it has no gross receipts in San Francisco since the server that processes the ad sales is in Nevada. Or whatever.

Nobody LIKES to pay taxes. I can think of much more fair ways of setting up a business tax (and setting up the tax structure in general) in San Francisco. But whatever taxes we have on business, some companies will say: Give me a waiver or I'll take my jobs and go somewhere else. It's the same game that Larry Ellison tried to play with the America's Cup. And the more you let them get away with it, the more others will try.

Posted by tim redmond on Feb. 12, 2011 @ 10:34 am

Only a matter of time before Twitter outsources to China anyway. Cheaper labor.

Posted by Guest on Feb. 12, 2011 @ 12:37 pm

Tim, the broader the base of a tax, the lower the rate can be and that more distributed impact lessens the burdens and impediments created by the tax. The payroll tax is a highly focused tax that adds a barrier of some size, you must admit, to the desired conduct of hiring and retention. We can debate the significance of that impact but it is there.

We want to be taxing undesirable conduct, like driving, the construction of luxury condos and the destruction of affordable housing, not desirable conduct like job creation.

I oppose the Mid Market tax holiday for a two main reasons.

First, it accepts the default framing of Mid Market as a problem area in need of a fix just as all booster planning sees San Francisco and San Franciscans as problems in need of a fix. "Mid Market" is really two different areas. Let's break it down.

From 8th to 5th, Market is where the poor neighborhoods of 6th Street and the Tenderloin come together, and the fact that those people exist near 5th and Market pisses off boosters to no end.

From 8th to Van Ness, that is where the handiwork of the boosters is revealed in its full glory. When BART and Muni Metro tore up Market in the 1960s and 70s, the functioning commercial district was disrupted and never recovered. That opened the door for the hideous mega projects of Fox Plaza and the Merchandise Marts which created the concrete wind tunnel where nobody wants to be because it is so unpleasant. If density were the solution, than the Fox Plaza Market Street frontage would be buzzing. Planning FAIL.

The best way to revitalize this section is to take a wrecking ball to Fox Plaza and the Merchandise Marts and to start over with a land use pattern that reflects the topology of the area at the base of the shoulder of Buena Vista where winds collect. The US Government declined the site that is currently torn up at 10th and Market in favor of 7th and Mission because the wind field was so strong it was feared that it would blow over Social Security beneficiaries. If Twitter relocates there, you'll see huddled techies braving the wind fields and little else.

Second, the proposal accepts the default framing that enterprise zone tax breaks work and are a good idea. One has to wonder whether Twitter demanded this tax break or whether Michael Yarne got on bended knee before a billionaire as is his first instinct?

Yes, we want to keep a growing employer in the City, but we also have what they want just like they have what we want. The posture adopted by this proposal places the City supine before the other party where it should be engaging the other party as an equal.

Accepting the booster frame on Mid Market and the failed supply side economic dogma of the Greenspan era is why progressives oppose this approach.


Posted by marcos on Feb. 12, 2011 @ 11:40 am

The SF mart was built in 1937. I'd also like to see any references for the US government declining the site due to surface winds.

Posted by Guest on Feb. 14, 2011 @ 9:55 am

Winds on spot,

'Guest'. I saw a committee (Board) hearing on the corner a year or two back and the question was whether it was smart to take down the building housing the post office and build another tower such as the one that houses a myriad of SF City offices there. A big concern was the wind.

Don't believe me?

Go stand there.

Large buildings create their own weather systems on surrounding streets.

I don't have anything against Twitter or the building but it's insane to give any kind of tax breaks to billion dollar industries built on techno/quicksand while trying to tax institutions like the Academy of Art University out of town after 80 years.

Give American Wine Distributors a tax break for a quarter century on the docks? Hell, they didn't ask for one. And, they sure as hell didn't ask to be tossed out along with 71 other Port tenants so that a guy with 40 billion dollars could have a yacht race.

Up is down and only one bright light cuts through the night ...

Giants start Spring Training today!


Posted by Guest h. brown on Feb. 14, 2011 @ 2:43 pm

Yes wind is a concern, I never said it wasnt.
I was speaking to Marc's statement that the government turned down a site in mid market due to wind (mother nature - not his)
I was pointing out that he was making a pretty obvious error in lumping fox plaza in with the SFmart building.

Posted by Guest on Feb. 15, 2011 @ 1:51 pm

Now if people were smart and want to build a new project around middle market
Then you would need to do set of things first would be transform some the building into something that going to make money and support that community because the tenderloin is low-income area only few thing work in the area We don’t need anymore bar’s liquor stores and gambling coffee shop’s

I personally would like to take the old billiards room and the parking lot on golder gate
Turn it into 10floor 1bedroom community apartment building with 7 new commercial store fronts around between 6th and 7th and golden gate

Posted by Guest racen on Feb. 17, 2011 @ 8:44 pm

The city payroll tax is dumb. If paying taxes is so very important (and it is), then everyone should pay. The way the current payroll tax is structured, only larger businesses pay - it doesn't entice businesses to expand and hire more workers. I agree that people and businesses who make more should pay more, but everyone should contribute something. Also, I haven't seen any of the articles here (big surprise) mention the fact that the reason Twitter is seeking an exemption is because they don't want to pay the tax on incomes, it's because they don't want to pay the tax on stock options. This is reasonable. Stock options in and of themselves have no value until they're exercised - if they ever are at all. Lots of bad things can happen - the value of the stock may drop below the strike price, the company could go belly-up or be acquired rendering options worthless. Options should not be considered part of payroll. Tax them as income or capital gains once they're exercised and converted into actual stock, but until that point they're meaningless pieces of paper. Overall, the city needs to restructure the tax code to be less punitive and encourage new businesses to form in the city, as well as encourage new ones to expand and hire more workers. Otherwise the exodus of business and the transformation of the "city" into a bedroom community for the Silicon Valley will quicken. You can't have all the social programs without a strong economy to support them. Eventually someone has to pay, we want those people to stay here rather than leave.

Posted by robco on Feb. 18, 2011 @ 9:17 am

Tax people for creating jobs. What a mess.

Posted by Guest on Feb. 18, 2011 @ 10:30 am

The way the payroll tax works with options is that the tax needs to be paid when the options are exercised. The person exercising has then "gotten" their money.

Posted by Guest on May. 07, 2011 @ 9:43 am

Everyone business - big or very small should contribute to business taxes.

Posted by Dogboy on Feb. 24, 2011 @ 10:56 am

"A week after finalizing its $315 million deal with AOL -- and four days after AOL laid off roughly 1,000 employees -- the Huffington Post announced 11 new hires and a number of staffing changes and initiatives.

At the top of the list: Biz Stone, Twitter co-founder and ex-CEO, is joining AOL and the Huffington Post as a "strategic advisor for social impact."


Posted by Guest on Mar. 15, 2011 @ 11:37 am

Subsidize what you want, tax what you don't want.

If you don't want jobs in San Francisco, tax them.

Posted by The Man on Mar. 18, 2011 @ 1:28 pm

Speak for yourself. 30k a year in extra tax is no joke. We can't hire anyone for less than 50k with the qualifications we need (plus health). As it is we're going electronic / paperless so the 2 little old ladies who are getting paid 30k to file papers won't be needed, and replaced by a computer. Our admin staff and HQ are going to be moved outside city limits for the same reason.
That's 6k+ a year we have budgeted for badly needed equipment upgrades and a better holiday party for our staff.

Posted by Harry on Apr. 03, 2011 @ 2:45 am

San Francisco has a population of about 800,000 at night and more than 1,200,000 during the day.

There are more jobs in San Francisco than there are San Franciscans.

At what point does the incremental next job that does not generate payroll tax end up costing the City more than it pays or is a wash?

Bringing in more commuters to work in San Francisco at small business may not be a good business deal for SF residents and property tax payers.

We don't need any more jobs for jobs' sake, what we need are jobs that pay taxes and jobs that employ San Franciscans who are out of work.


Posted by marcos on Apr. 03, 2011 @ 7:36 am

No child left behind, it takes a village, win the future, military intelligence, stand up for exciter, like a good neighbor state farm is there, a choice not an echo, doing more with less, god made Adam and Eve not Adam and Steve, remember the Alamo, mi cago en dios, patrio o muerte, ...

Posted by meatsack on Oct. 14, 2011 @ 4:01 am


Posted by Guest on Oct. 14, 2011 @ 7:17 am

I share the same opinion, I don't see how the payroll tax is a job killer, this makes no sense. It's time for us to grow and act responsibly about our businesses. The payroll tax rules may change in the future but that doesn't mean we have to shut down our businesses because of it.

Posted by payroll outsourcing companies on Oct. 14, 2011 @ 2:04 am