San Francisco voters could soon overhaul the city's tax system

SAN FRANCISCO (KGO) -- Tax relief could soon be coming to thousands of businesses around San Francisco.

On Monday, two business leaders submitted a proposed measure that would overhaul the city's tax system.

Laurie Thomas, the executive director of the Golden Gate Restaurant Association, was one of those people.

"We know that any relief we can give. Even if it's a couple of thousand dollars a year to our small businesses is a nod in the right direction," Thomas said.

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If passed by voters in November, the proposal would simplify the city's notoriously complex tax system.

It would also allow small businesses with revenue under $5 million to be exempt from business taxes - up from the current level of $2 million.

It's a move that proponents say would allow for more business expansion and hiring.

"Almost 90% of our restaurants, and I think a similar percent of our retail businesses, 60% of our retail businesses would be completely exempt from our gross receipts tax," said Sarah Dennis Phillips, the executive director of the city's Office of Economic and Workforce Development.

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At The Pallette Tea House in Ghirardelli Square, owner Dennis Leung says he supports the proposal.

"Anything that can help small businesses would definitely be welcomed," he said.

Dennis says after rising in 2021 and 2022, The Palette's business actually started to decline again last year.

A contrast to the other restaurant he owns in San Mateo - where Dennis says doing business is simpler.

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"There's a lot of extra fees here and there in San Francisco that make more difficult, more challenging than in other cities," Leung said.

In order to offset the cost of the proposed tax breaks, Thomas says rates would rise again in 2027.

But she hopes a three-year window would allow more small businesses to recover to their pre-pandemic levels - before absorbing the additional costs.

"If you didn't make some of these changes, you were going to lose some of that money anyway. Employers might pull out. They might not bring people back to work," Thomas said.