San Francisco Considers Tech Tax

The downside to living in a boom town like San Francisco is that if you aren’t one of the gold rushers or tech billionaires, the expense of living around those who are can get pretty overwhelming pretty fast – and lead to displacement for those left behind in the boom’s wake.

But San Francisco is considering a move that would slow down that effect some – by imposing a payroll tax that would apply only to tech firms, the engine behind San Francisco’s skyrocketing prices.

“You have a C.E.O. who cares about kids in Ghana one week or dolphins the next week. Those are important,” Maria Poblet, who leads an organization that assists Latino families facing eviction in San Francisco told The New York Times. “But the people impacted by displacement in San Francisco are a worthy cause, too.”

Poblet notes that though tech CEOs can and have been generous philanthropists – the reality is that paying more taxes to help with homelessness and lower-cost housing in San Francisco would be of greater long term benefit to the residents of the city.

The proposal for the payroll tax comes care of Eric Mar – a member of the Board of Supervisors – and would put a 1.5 percent payroll tax as a form of indemnification against the downside of the tech explosion.

Mar lauded the soaring techonomy for having been “a tremendous benefit to the city in many ways,” but noted that the benefits at this point are incomplete at best.

“I don’t think they’ve been paying their fair share.”

The tech tax comes as San Francisco itself is facing gnawing budget gaps – and the infusion of funds would help pay for a homelessness mitigation program and go toward the resolution of the affordability crisis, according to Mar.

The passage of the act is considered an extreme long shot and is seen as the latest mass channeling of resentment against the ascendant tech worker class in the city and an increasing feeling that they live apart from the traditionally collaborative environment among Bay Area residents.

“Billions of dollars of venture capital have poured into the city and pushed our people out,” said Ms. Poblet noted.

Tech firms, for their part, have remained silent on the issue thus far.

San Francisco’s budget, which, at $9.6 billion, is larger than a number of state budgets, is around 7 percent higher than last year’s.

And over the next two years, the city faces an unusually large deficit projection of $250 million, a gap they are hoping to fill with a sales tax increase in November to help pay for transit and homelessness projects and to help balance the budget.

But whether that will fill the hole remains to be seen, as real estate transfer taxes are expected to fall this year – and by a sharp 14 percent, according to Benjamin Rosenfield, the city controller, who attributes this decline to a drop in large commercial real estate transactions.

“You can see signs of cooling,” Mr. Rosenfield said about San Francisco’s economy. “The question is: When will things turn south?”

That remains to be seen – tech firms are not growing as fast as they once were, with staff size only increasing 3 percent this year. The median home price is San Francisco is also coming down – it fell 13 percent between April and May alone.  However, that big drop brought the average price down to around $1 million – so it is not exactly bargain shopping yet.  But it is still a decrease – so far one of about 2 percent annually.

The tech tax could bring in about $140 million per year, and is often touted among supporters as a reasonable way to recoup some of the tax breaks tech firm got five years ago when they were part of neighborhood revitalization plans.  Twitter was a particular beneficiary – and threatened to leave the city twice over said breaks.

To pass the proposal would need the support of 6 of 11 members of the Board of Supervisors – and that would only get it on the ballot in November. So far only three are offering public support.

Even if it makes it to the ballot, it needs a 2/3 voter majority to win – a rather high bar to pass.  And many think it shouldn’t given the damage it could do to the local economy.

“This tax on technology jobs will not help our housing crisis,” said Scott Wiener, a member of the Board of Supervisors who opposes the measure. “It won’t make housing less expensive. It won’t reduce the number of homeless people. What it will do is chase away good-paying jobs and erode our tax base.”