San Francisco is the only city in California with a payroll tax and the Board of Supervisors decided to do something about that. Tuesday afternoon they unanimously voted to put a consensus measure, devised by the mayor, supervisors David Chiu and John Avalos on the ballot in November.
Stephen Cornell owns Brownies a hardware store that's been operating in San Francisco for more than a century. He supports the proposal to do away with the payroll tax, which critics say discourages job creation.
When asked if it is really a job killer, Cornell said, "It can be. You have second thought before you hire somebody because it's just one more piece of money you have to pay out."
Right now the city levies a payroll tax of 1.5 percent on businesses with at least $250,000 in payroll expenses. Just 10 percent of the businesses located in the city currently pay that.
The gross receipts system would tax business revenues or receipts with the rate varying according to the industry and size of the company. It's estimated 20 percent of the city's businesses would be affected. Those earning less than $1 million in gross receipts would be exempt.
A coalition of city, business and labor leaders is pushing the proposed change, calling it more broad-based, and equitable. Mayor Ed Lee says it's a game changer.
"But we'll tax still more fairly and we'll tax people's success, and they would be much more willing to share in that, than they would if we were trying to tax them while they are trying to grow," said Lee.
But the owner of a Chevron gas station says his taxes will triple under the gross receipts plan. Car dealerships will also see their taxes soar. A Mazda dealership in the city expects to pay about $30,000 more. But an industry spokesman says the city has agreed to some last minute tweaks in new business license fees that have made the proposed tax changes more palatable.
"For example the business registration fee at one point was rumored to be as high as $100,000 for businesses with $100 million in gross receipts and our coalition was able to keep retailers at a rate of $20,000 so that was quite a change in our favor," said Boe Hayward of the San Francisco Automobile Jobs Alliance.
The new business fees are expected to generate $28.5 million a year. Supporters say overall this tax change will create more than 1,700 jobs each year. In fact, they're calling it the San Francisco jobs initiative.