San Francisco Gross Receipts Tax on Businesses, Proposition E (November 2012)
The ballot measure, if approved by the city's voters, will phase out the city's current payroll tax over a period of five years and replace it with a gross receipts tax. It is estimated that this will result in $28.5 million more a year in revenue to the city.
San Francisco previously levied a Gross Receipts Tax (GRT) on businesses. It gave up that tax in 2001 as part of a lawsuit settlement, when a California court ruled that the two-tiered GRT then in effect was unconstitutional.
About 10% of the businesses in San Francisco pay the current payroll tax that San Francisco levied after it gave up its previous GRT. That's because the current payroll tax only applies to businesses with more than $250,000 in payroll; they must pay a tax to the city of 1.5% on their entire payroll expense. If this ballot measure passes, every business in the city will pay a tax, which means that 90% of the businesses in San Francisco will pay more in taxes than they currently do.
The San Francisco Board of Supervisors put new business taxes on the local ballot in 2002 and 2004 to try to make up for the tax they lost when a court ruled that their GRT was unconstitutional. The city's voters, however, rejected those business taxes.
- Mayor Ed Lee: "There's a need for the city to build consensus on a complicated measure like this."
- Supervisor John Avalos: "This is a change in the business tax structure that's been a long time coming. It's a measure that's fair and will stand up to the test of time."
- The San Francisco Chamber of Commerce. Steve Falk, president and CEO of the group, says, "When you see the Chamber of Commerce and the Labor Council on the same podium, you know something is going on and that something must be positive."
- The San Francisco Labor Council.
- Progressive journalist Randy Shaw, who says, "Shifting from taxing jobs to gross receipts is itself a progressive victory, and creates a platform from which future revenue increasing measures can be spawned."
- The "technology business sectory" in the city is in favor of transitioning to a GRT. As a whole, they say that the current payroll tax punishes job creation. Ron Conway, a leader with sf.citi, a public policy group that some describe as "a tech rival to the [San Francisco Chamber of Commerce], says, "We are in favor a of a gross-receipts-based tax solution."
Text of measure
The question on the ballot:
|Proposition E: "Ordinance amending the Business and Tax Regulations Code to: 1) enact a new Article 12-A-1 (Gross Receipts Tax Ordinance) to impose a gross receipts tax and an administrative office tax on persons engaging in business activities in San Francisco; 2) amend Article 12-A (Payroll Expense Tax Ordinance) to reduce business payroll expense tax rates based on the amount of gross receipts tax collected under Article 12-A-1 (Gross Receipts Tax Ordinance); 3) amend Article 12 (Business Registration Ordinance) to establish business registration fees based on gross receipts and amend the current Business Registration fees to generate approximately $28.5 million in estimated additional revenue; 4) amend Article 12-A (Payroll Expense Tax Ordinance) to add a sunset date to the surplus business tax revenue credit; and 5) amend Article 6 (Common Administrative Provisions) to establish requirements for filing a tax return under Article 12-A-1 (Gross Receipts Tax Ordinance), establish penalties for non-filing, and amend the requirements for filing payroll expense tax returns and penalties for non-filing to conform to the new gross receipts tax."|
Path to the ballot
The measure was referred to the ballot by an 11-0 vote of the San Francisco Board of Supervisors on July 31, 2012.
The unanimous approval of the ballot measure by the San Francisco Board of Supervisors came after months of wrangling about whether the measure should be a "revenue neutral" transition from the payroll tax to a GRT, or whether the new GRT should bring in more revenue every year than the payroll tax it will replace. The local SEIU threatened to place a rival tax increase on the ballot via the petition process unless the GRT added additional revenues. Ultimately, local politicians agreed not only to moving to a GRT over a payroll tax, but to what amounts to an overall tax increase on businesses in the city.
Mayor Ed Lee and Supervisor John Avalos also wrangled back-and-forth with competing visions of how best to increase the business tax in the city before agreeing on the November measure as a compromise.
- San Francisco Chronicle, "S.F. supes OK tax-reform measure", August 1, 2012
- Beyond Chron, "Progressives Should Support SF Business Tax Overhaul", May 14, 2012
- San Francisco Chronicle, "Key calls for SF mayor: worker pay, business taxes", April 29, 2012
- Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
- San Francisco Examiner, "Dueling real estate taxes submitted for November ballot by Lee and Avalos", June 20, 2012