San Francisco’s Business Tax Reform Gains Unprecedented Support
In a striking display of unity, San Francisco’s business community, labor unions, and political figures are banding together to support a significant business tax reform. The proposed changes, which aim to overhaul the city’s current gross receipts tax system, have garnered the backing of both Mayor London Breed and her political challenger, Supervisor Aaron Peskin.
The reform seeks to shift the tax focus from the number of employees a company has in the city to the company’s sales, potentially reducing taxes for small businesses and encouraging larger corporations to maintain their workforce within city limits. This move is expected to make San Francisco’s budget less reliant on major companies and enhance the city’s economic resilience.
After thorough analysis by former City Controller Ben Rosenfield and the Treasurer and Tax Collector’s Office, officials anticipate an initial dip in business tax revenue, followed by a gradual increase. The measure is designed with revenue neutrality in mind, balancing out over time despite an estimated $100 million deficit in its first year.
The current tax structure, which heavily taxes a company’s workforce in San Francisco, has been criticized for discouraging businesses from keeping employees in the city. The new proposal would alter this by basing 75% of local taxes on a company’s San Francisco sales and 25% on employee location. This change is expected to impact various businesses differently, with some large corporations facing marginal tax increases.
Small businesses stand to benefit significantly from the reform. The proposal suggests raising the sales threshold for gross receipts tax exemption from $2.19 million to $5 million, allowing more small businesses to operate tax-free. This adjustment comes as part of a broader simplification effort, reducing the number of tax categories from fourteen to seven.
The push for tax reform in San Francisco has been gaining momentum since 2022. A report by the Controller’s Office highlighted the city’s high business tax burden compared to neighboring cities, sparking calls for change. The reform effort has involved extensive negotiations with various stakeholders, including major employers like Google and Salesforce, as well as labor unions that have agreed not to oppose the measure.
While the reform proposal addresses many concerns, it does not tackle the issue of raising the signature threshold for placing new taxes on the ballot—a point of contention for business groups. Nevertheless, this collaborative initiative marks a significant step toward reshaping San Francisco’s approach to business taxation, with hopes of fostering a more attractive and equitable economic environment.
