San Francisco Substituting Payroll Tax with Gross Receipts Tax?

All throughout the Mayor election of last year, most of the candidates (including now Mayor Ed Lee) ran on a platform of bringing business back to San Francisco to stimulate the economy.  However, it looks like payroll tax is being substituted by a gross receipt tax.  San Francisco is the only city in California with a payroll tax, a tax that

penalizes business from hiring as it taxes businesses more for hiring people.  This tax pretty much says, if you hire more people, you are going to pay the city more, which raises the question, “Why would I hire that extra person or expand my workforce in San Francisco when companies could do it elsewhere?”

I was pleased that these, soon to be, leaders addressed this tax, but now they are simply replacing one anti business tax with another to generate around $28.5 million dollars for the city general fund.  As a result, I believe that this measure will save (and or generate) zero jobs.

According to Bay Citizen:

San Francisco Mayor Ed Lee announced Monday that he and Supervisors David Chiu and John Avalos have reached an agreement on a measure to gradually replace the city’s payroll tax with a gross receipts tax.
“San Francisco is the only city in California with a payroll tax, and the time to stop punishing companies for creating jobs in our City is long overdue,” Lee said in the statement.The measure, if approved by voters in November, will generate $28.5 million in “new general fund revenue” and help create 1,750 private sector jobs in its first year, according to a statement from the mayor’s office.

Both Lee and Avalos had proposed measures to replace the city’s 1.5 percent payroll tax with a tax on gross receipts. But Avalos also proposed increasing the business registration fee to generate additional revenue for the city.

The new measure includes increases to that fee beginning in 2013 and phases in the gross receipts tax over five years beginning in 2014, while phasing out the payroll tax, according to the statement. Small businesses that earn less than $1 million in gross receipts would be exempt from the proposed ordinance

The only good thing about this is that voters will need to approve the measure in November, something that is difficult to predict.  This city loves to demonize businesses, so I hope voters can look at the bigger picture and see that business give people jobs, who pay income tax, who spend whats left on rent, food and entertainment.

As I mentioned yesterday, the unemployment rate in San Francisco is going up.  Policies like this send the city int the wrong direction for job growth.

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