Voters may be asked to tax SF tech companies

http://www.sfexaminer.com/voters-may-asked-tax-sf-tech-companies/

by enra • 10 years ago

55 63 10 years ago

etjossem2• 10 years ago

San Francisco's currently seeing a strange political alliance between homeowners - who want their valuable property in the Bay Area to appreciate - and well-meaning progressive activists earnestly trying to alleviate poverty.

Supervisor Peskin has built up a reputation for walking this line; for instance, he generally favors increasing affordable housing (BMR) requirements to very high levels. That appeals superficially to progressives, but also causes fewer units to be created overall, leading to ever-higher market rates and single-family-home values. It's really bad news for anyone who ever wants to rent in a market rate apartment.

This proposed policy follows a similar vein. It subsidizes everyone else - both asset-rich homeowners from earlier generations and those barely getting by - at the expense of San Francisco's newcomers, who have no reason to support him anyway. Coming from Peskin, this move doesn't surprise me at all.

Great to see renters (of all income levels) finally banding together in the most recent election: http://www.sfyimby.org/

seibelj3• 10 years ago

Penalizing a single industry makes no sense. Either increase payroll taxes across the board for every industry, or you are literally saying that tech jobs are "worse" than other jobs and must be punished in order to make up for how they harm the city. Totally ridiculous, populist idiocy.

fennecfoxen• 10 years ago

Come now. When your politics are fair it means the politician doesn't have any power - and if you don't have any power, how are you supposed to give favors to the people who paid for your campaign to get elected?

cmurf• 10 years ago

OK so what sort of ridiculous idiocy would you call it when tax breaks were doled out just to the tech industry? And how is this not some form of recapture of previous incentives?

gorkemyurt2• 10 years ago

No, tax breaks were given to the mid market area not to specific companies, so even the restaurants and gyms get tax breaks in the area

seibelj3• 10 years ago

I also disagree with targeted tax breaks to specific industries, but at least they entice rather than repel companies. Taxing a specific industry via referendum smacks of pandering for votes.

Cshelton2• 10 years ago

If this passes, I can only see it as a net loss to the city.

Higher payroll taxes, less disposable income from tech employees, less money put into the market by the private sector in favor of taxes put in by the government. It is highly understood about the effect of economic multipliers between private industry spending and government. When will progressives ever learn?

On that note, businesses: There are many states who would give many tax incentives for moving your company to the city/state. Texas, Washington...even NY...

SF and it's voters apparently do not want you...time to go somewhere that does.

igorgue3• 10 years ago

Come on, nobody is going anywhere there's no tech investors.

There are many states, that pay a lot less taxes (some only Sales and Property tax) and the SF Tech community always ignores because SF is so cool (there's no tech investors).

You guys are staying, tax or no tax, stop whining.

justizin3• 10 years ago

SF and it's voters apparently do not want you...time to go somewhere that does.

Everyone who thinks this way, please, yes, go!

dcosson• 10 years ago

Idk. It seems like the mistake was enacting these tax breaks in the first place, without putting the necessary effort into building enough housing to support the new jobs (or improving transit and building out more densely populated suburbs).

The ideal solution was probably to invest heavily in housing 5 years ago. But since it's too late for that, at this point it's just damage control. Even if SF does finally get moving on building more housing, it's so far past having enough of it in the reasonably near future that a small incentive for jobs to go elsewhere probably would help things in the next ~5 years. As far as progressive redistribution schemes go, this one actually makes more sense to me than most (as much as I hate to agree with Peskin et al).

nugget3• 10 years ago

I'm just an armchair economist but it seems obvious that this payroll tax (especially when combined with minimum wage hikes) will further incentivize companies to relocate entry level workers to lower cost of living areas, e.g. Yelp customer service moving to Phoenix. Companies will keep their most skilled (and highest paid) workers in San Francisco because access to those workers is why they HQ there in the first place. As a result, the middle class continues to hollow out and inequality is actually worsened, which likely puts additional pressure on homelessness and the other problems they were trying to solve in the first place. I wonder if these politicians think about the unintended consequences of their proposals - whether they don't know, don't believe it to be so, or simply don't care.

coldcode• 10 years ago

If you only tax for workers above a certain wage and use that money to support rentals for lower income folks you might make it work. Maybe such a thing would incentivize tech companies to move elsewhere which of course has other side effects. There is no free lunch when using taxation to enact public policy.

raldi• 10 years ago

If you only tax for workers above a certain wage [...] you might make it work.

Actually, payroll taxes usually do the opposite: "It only applies to the first $110K in earnings. That way, it makes sure to capture a significant portion of the earnings of all poor-to-middle-class people, and then cut off before capturing a significant portion of the earnings of any rich people."

http://gawker.com/5986230/the-unfairness-and-stupidity-of-th...

nugget3• 10 years ago

You run into the same problem as means-testing social security and similar ideas -- turns out that income is a very pyramid-like distribution and there's just not a ton of it at the top, relative to the base and the middle. It wouldn't surprise me if 75% of this proposed tax would be collected from the component of salaries below the FICA limit ($118,500 for 2016). Another question is do you consider RSUs to be part of payroll on which tax is due? What about options? These can be 50% or more of compensation in many of these large firms.

tomsaffell• 10 years ago

Hope this doesn't sound nitpicky, but I'm curious about the implication that 'Yelp customer service' would be considered 'middle class'. Were you specifically meaning that, or was it just co-incidence? I'm curious because I find that the issue of 'the hollowing out of the middle class' hinges on the definition of 'middle class', so I'd like to know how this might help inform the definition. thanks.

aphextron• 10 years ago

Customer service jobs at a large tech firm in SF start in the $20/hr range. Firmly middle class.

nugget3• 10 years ago

Discussions of class can be semantic minefields, but broadly I'd consider that entry level customer service job ($20/hr as another poster mentioned) as lower middle class. Importantly though, entry level lower middle class jobs can serve as a path upwards for skilled individuals who would become more solidly middle class after a few years. It's not just the loss of the entry level jobs I'd look for but the few rungs in the ladder above them as well.

protomyth3• 10 years ago

For the purpose of this bill, how is "tech company" defined?

Hydraulix989• 10 years ago

I was thinking the same thing. Is Uber a taxi company or a "tech company"? Is Airbnb a lodging company or a "tech company"?

Don't all companies nowadays involve some sort of "technology"?

protomyth3• 10 years ago

It got answered in the article for the follow-up thread https://news.ycombinator.com/item?id=12003570

"The measure identifies tech companies by the type of tax code they use under the Internal Revenue Service’s North American Industry Classification System. Companies classify themselves. They may face penalties if a government audit finds they are misidentifying themselves."

jonathankoren• 10 years ago

Probably isn't "tech company" at all. Twitter's payroll tax break which this would resend is actually for companies in Mid-Market, which are the big tech companies. It's not really different than NYC giving a tax break to investment banks by defining the tax break as being "a Lower Manhattan Wall Street address."

http://www.sfgate.com/business/article/Companies-avoid-34M-i...

protomyth3• 10 years ago

I'd have thought the same thing, but it looks like they went with their IRS designation. Odd choice, really.

geofree2• 10 years ago

SF has a massive annual budget, about $9B (http://sfmayor.org/ftp/uploadedfiles/mayor/budget/SF_Budget_...). To put this into perspective our city has a larger budget than 12 individual US States (https://en.wikipedia.org/wiki/List_of_U.S._state_budgets).

The default position of the city is to consistently raise taxes. Is it possible to utilize our current resources more effectively?

skyrw• 10 years ago

Thinking like this is considered bigoted nowadays.

dragonwriter3• 10 years ago

To put this into perspective our city has a larger budget than 12 individual US States

It also has a larger GDP than something like 36 individual US states (don't have same year numbers, but only 14 states -- and, obviously, one of those is California -- have 2015 GDP [0] higher than SF's 2014 GDP [1]) -- and that's not just because its bigger in population than some states, since only four states (Wyoming, Vermont, Alaska, and North Dakota) have smaller population than SF.

Is it possible to utilize our current resources more effectively?

Seems to me SF is doing something right.

[0] https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP

[1] https://en.wikipedia.org/wiki/List_of_cities_by_GDP

dguaraglia2• 10 years ago

SF could do much better with the amount of taxes we pay. I have no idea where the taxes go, but the state of some roads (let alone public transportation) is pretty bad. San Francisco is only doing so well because it's the only "lively" city around Silicon Valley.

bpodgursky• 10 years ago

Yeah, but this ignores the fact that the CA budget, and CA taxes, alone are enormous. This is the delta spending by SF, on top of CA.

ameister142• 10 years ago

To put this further in perspective, the NYC budget for FY 2017 is 82.2 Billion dollars, which about matches population difference.

geofree2• 10 years ago

Or further perspective, Los Angeles is 8.7 Billion. (http://cao.lacity.org/budget15-16/2015-16Proposed_Budget.pdf)

mc324• 10 years ago

Yes, please tax these companies out of town so they can take their corp taxes and workforce with them so we can return to the grime of the 80s and 90s! Great idea only visionary supervisors could have!

Seriously, this is how they address issues of utmost importance? Never thought I'd say this, but I almost want technocratic politicians over these reactionaries st this point.

The larger issue, the elephant in the room is we need an integrated regional government with teeth and foresight. But all the pols in all these cities will not want to give up their power in exchange for a better planned and governed future.

o0-0o2• 10 years ago

I find it interesting that you can argue that government is the solution & the problem at the same time. Wouldn't it be easier to remove the beaurocrats, regulations, and taxes?

mc324• 10 years ago

I think they are incentivized to think too parochially.

f3llowtraveler• 10 years ago

The bottom line is, these tech companies all heavily support the Democratic party and Democratic causes.

Therefore it's cosmic justice that they should be subject to Democratic policies.

Put your money where your mouth is!

freehunter2• 10 years ago

Didn't Tim Cook just throw a fundraiser for Paul Ryan?

rm_-rf_slash2• 10 years ago

The Democratic Party policies include support and protected class status for LGBT individuals, whose inclusion in the labor force expands the talent pool and are already account for a big chunk of the tech workforce.

But being free to fire someone because they prefer to date members of the same sex - or because they are black or a woman or not a Protestant Christian - does make things cheaper and simpler for business. Is that the world you would rather live in?

justizin3• 10 years ago

Yes, please tax these companies out of town so they can take their corp taxes

I'm confused. You think the companies are valuable because they pay taxes, but shouldn't be taxed?

Truthfully, this is only a return to the previous state of affairs, a 1.5% payroll tax isn't that painful - the impact on Twitter would be less than 5 headcount.

The reason companies like Twitter originally sought a tax break is because of how stock options are taxed. If you work for twitter for several years and never cash in your stock options, they have to bank the potential payroll tax they would pay on the purchase value of these options. So many employees never cash in on options that this creates a kind of snowball that freezes a ton of capital. In effect, this means that current investors in a company like Twitter are banking money to pay the taxes of future potential employee-investors.

I agree this doesn't make economic sense, I don't think wholly opposing payroll tax is a reasonable reaction to it. I don't know what the solution is, but it's amusing to see this come full circle.

mc324• 10 years ago

NYC used to have one... Maybe it still does. I don't agree with it. Tax them on profits, whatever, but be fair. Don't go out of your way to tax a class of business in special ways, unless you're trying to disincentivize them.

So, of course all companies should pay taxes their fair share of taxes. Just don't construct special schemes to tax a class of businesses.

Imagine Detroit saying, we're broke, let's tax car companies by the amount of potential pollutants their end products could produce. Hey, they'd have a windfall till Tennessee says, hey, GM, wanna come over here? We'll tax you as a normal state would (as an exaggerated example).

kspaans• 10 years ago

Interesting how the interplay of payroll tax and stock options creates a capital issue like that! On a sidenote, do you know why payroll taxes are charged to the employer, rather than showing up on the employee's paycheque?

gorkemyurt2• 10 years ago

Aaron Peskin is doing everything to fuel hatred against tech workers in the city; he reminds me of populist Latin American leaders who antagonize the population against a certain group to grab media attention and get votes..

How do you decide if a company is a tech company? They use computers, they must be a tech company..

igorgue3• 10 years ago

The same industry that incorporate in a different state mainly to avoid taxes, doesn't like taxes... Big surprise. Move to Delaware guys lol.

igorgue3• 10 years ago

Trump / Peter Thiel 2016!!!

mc324• 10 years ago

Yeah --no. Explain how those two would fix the disarray in bay area government.

dang• 10 years ago

Please don't.

We detached this subthread from https://news.ycombinator.com/item?id=11996105 and marked it off-topic.

o0-0o2• 10 years ago

San Francisco should not do this. Instead, they should enact a city tax, much like New York City. Anyone that lives within the city should pay an extra tax. Now, this assumes they have to do this in the first place. The easiser / cheaper thing to do would be to elimiate the social safety net that lets the problem fester.

seibelj3• 10 years ago

A city tax makes far more sense than saying, "Anyone who works for a company in industry XYZ pays more taxes because we hate your entire business category". I have no comment or opinion about your "social safety net" idea. What kind of signal does this send to tech companies? Also, see the failed Massachusetts tech tax that caused lots of controversy before being repealed [0]

[0] http://readwrite.com/2013/09/27/massachusetts-tech-tax-repea...

gyc• 10 years ago

A city tax makes far more sense than saying, "Anyone who works for a company in industry XYZ pays more taxes because we hate your entire business category"

Not if you're trying to take advantage of resentment by a certain portion of the population towards industry XYZ.

rm_-rf_slash2• 10 years ago

This measure seems strangely punitive. I think the better option would be a progressive payroll across-the-board tax above a certain level, say $100,000.

The proposal as it stands seems to imply that tech alone is responsible for widening income inequality, particularly in San Francisco. The more accurate perspective is that tech these days has allowed small numbers of extremely skilled people to perform work that half a dozen moderately skilled workers could not accomplish as well on their own. As a result, it makes a lot more sense to pay one person $200,000+ a year than six people at $100,000. The biggest income gains are near or at the top, and the taxes should follow.

Taxing an engineer making $85k just because they work in tech only makes an already very expensive city less worth living in.

justizin3• 10 years ago

The employer is actually taxed, not the employee, and it's a 1.5% tax, which is the same amount of the original payroll tax which was rolled into gross receipts a few years ago.

This is hardly armageddon.

marcosdumay• 10 years ago

Employment taxes are always paid by the employee.

When the employer is the one actually transferring the money to the government, market economics make it sure that they pass the cost on to the employee.

capkutay2• 10 years ago

Worth mentioning that this requires a 2/3 vote to pass which means it has pretty slim chances. The proposal has yet to pass through Board of Supervisors which always introduces its own amendments as well.

dannyr• 10 years ago

This is why it may be up to the voters to decide in the November election.

capkutay2• 10 years ago

Right it will be up for voters to decide. But a 2/3 majority victory is almost impossible in SF. . The ultra-progressive ballots have been relatively unsuccessful in SF lately even with 1/2 vote required to win (anti-Airbnb measure lost, Mission moratorium lost).

Voters may be asked to tax SF tech companies

Related Stories