For over a decade, progressives have complained that San Francisco charges business a payroll tax that literally taxes jobs – when a gross receipts tax that taxes company profits is far more equitable. But now that Mayor Ed Lee is assembling a coalition to make that switch
a reality, labor unions and the Bay Guardian
are grumbling that it’s “revenue-neutral.” Yes, San Francisco needs more revenue – and I don’t necessarily disagree with many of the policy arguments
being made. But these complaints are tone-deaf to the political reality that any
tax measure requires a vote by the electorate – and progressives have an abysmal record when it comes to raising revenue. Raising taxes to pay for services is always less popular than protecting tenants or workers’ rights, but we have not seen the Left wage the kind of serious grass-roots effort that would address such an obstacle. Even a revenue-neutral measure to replace the payroll tax with a gross receipts tax is progress, and it does not preclude future efforts at raising revenue – if the political will is there. Besides, the only time progressives have successfully raised taxes in the past 10 years is when they neutralized part of the business community.
Only 10% of San Francisco businesses even pay the payroll tax – which levies employers by how many people they hire. Therefore, any move that replaces the payroll tax with a gross receipts tax (where companies must pay a portion of their revenue) would be a progressive victory – as 90% of employers who currently pay no business tax would start chipping in. Commercial real estate interests have a relatively small payroll but make huge profits – so they would stand to lose the most from this switch, which explains why groups like BOMA (Building Owners & Managers Association - the commercial real estate advocacy group) are already complaining.
Of course, progressives have only talked about this switch for years – and the reasons for doing so are not simply because the City is in tough times and needs more revenue. It’s also the right thing to do – if we are going to tax businesses, we should be doing it in a progressive way.
But rather than seize on this historic opportunity, progressives are grumbling
at Ed Lee’s proposal – because the Mayor insists that any business tax reform be “revenue-neutral.” They rightfully complain that City workers and non-profits have endured years of budget cuts, and that we lost $50 million a year in business tax revenue after a dubious lawsuit settlement in 2001. And they would be right – if they had a clue on how to persuade voters to pass a major tax increase.
Let’s look at the history. In November 2002, San Franciscans defeated an increase in the real estate transfer tax by 10 points – while on the same ballot, tenant activists crushed a measure to fast-track condo conversions by a 20-point landslide. In November 2004, voters killed a sales tax increase – and rejected by 10 points a temporary gross receipts tax. But the best example was November 2006
– where San Franciscans passed every progressive measure on the ballot, from paid sick leave to relocation money for tenants. Except for a Parking Tax increase, which lost by a 2-1 margin.
Here’s the problem. Every election cycle, progressives say we need more revenue – and they come up with a good tax increase measure. They get their friends on the Board of Supervisors to place it on the ballot, but then they don’t wage the kind of grass-roots campaign necessary to convince a skeptical public – or to counter the thousands of corporate money that goes into deceptive hit pieces. As November gets closer, other priorities come into play – and revenue measures get lost in the mix. When was the last time you had a campaign volunteer at your door supporting a tax measure, as opposed to tenants rights or a candidate for Supervisor?
For a brief moment
in the summer of 2010, I had hope that progressives finally got the message. Labor wanted to raise the Hotel Tax by 2%, and rather than get four Supervisors to slap it on the ballot (which they could have done), they put in the hard and tedious work of collecting 100,000 signatures. I volunteered to help them out, because I assumed that such a grass-roots effort would mean they’d have a real campaign once it qualified for the ballot. But when August rolled around, labor had other priorities – public employees were under attack with Jeff Adachi’s Pension Reform measure. The Hotel Tax never had a real campaign, and it went down to defeat.
This November, we will have a Housing Trust Fund on the San Francisco ballot (which raises the real estate transfer tax), one or two tax increase measures on the California ballot – and right-wingers are back with another anti-union ballot measure. Does anyone seriously believe this is the right time to put a local business tax increase measure – that would get unified opposition from Downtown? Does anyone think that labor and progressives will be able to focus for that kind of fight? Who is willing to put in more
resources than we’ve seen in prior elections?
Granted, San Francisco has passed the occasional tax measure – but not when you have unified opposition from the business community. We passed a real estate transfer tax measure in November 2008 and November 2010, but these only affect a small sliver of real estate interests – the Chamber of Commerce wasn’t thrilled, but most business owners didn’t have a dog in the fight. In November 2008, we also plugged a loophole in the Payroll Tax – but only by increasing the small business exemption. And in June 2008, we barely got a two-thirds majority for a Parcel Tax for public schools – but that’s because everyone (including business) supported it.
We’re already going to have BOMA and other real estate interests strongly oppose replacing the payroll tax with a gross receipts tax. And while it’s fun for progressives to watch business interests fight among each other (the tech industry supports Mayor Ed Lee’s proposal, because they are heavier on payroll), all that division will go away if the tax measure gets tweaked to raise revenue. As Small Business Commissioner Scott Hauge told the Bay Guardian
, “if there's anything that is unifying in the business community, is that it's revenue neutral.”
A “revenue-neutral” business tax measure that replaces the payroll tax with a gross receipts tax is still something progressives should get behind. And it doesn’t mean that in two years, as the City still has financial woes (and after the Left has proven they can pass tax increases!), we can’t push for an increase in the business tax. At this point, though, progressives are in danger of snatching defeat from the jaws of victory – when we’ve wanted a gross receipts tax for years.