San Francisco Postpones Business Tax Increases to 2025
Increase to gross receipts tax was seen as impediment to the latest startup boom.
San Francisco has decided that halting the relentless rise in the city’s business taxes, increases that were ushered in by city voters, is too urgent a priority to wait for the same voters to repeal the action in a 2024 referendum.
City officials have put off plans to increase business taxes that were set to go into effect in 2024 until 2025. The city has determined that another business tax increase is impediment to San Francisco’s economic recovery and to its current effort to ride the wave of a tech boom around generative AI.
Mayor London Breed had proposed in the middle of 2023 to let voters decide whether to postpone increases in the gross receipts tax, which makes up most of the city’s business tax and brings in about $800M a year.
In July, the San Francisco’s Controller’s Office issued a report which said the city’s most viable path to recovery is tax reform that diversifies the tax base while paring stratospheric business taxes.
A tech company in San Francisco with $30B in sales and 10,000 local employees pays 20 times more in local business taxes that it would if it were located in Mountain View, 200 times more than in San Jose and 1,300 times more than in Sunnyvale.
San Francisco, which started the decade with the highest business tax burden of any city in California, has raised rates on existing taxes while continued to pile on new business levies during the pandemic.
City voters have approved the creation of a Homelessness Gross Receipts Tax, a Commercial Rents Tax and an Overpaid Executive Tax, which targets companies where there is a huge spread between what the top execs get paid and the average workers earn.
A big chunk of the gross receipts tax San Francisco already has in its coffers was challenged this week in court by General Motors, which claimed its Cruise self-driving car initiative was unfairly taxed by the city to the tune of $108M.
GM’s autonomous taxi experiment, which was briefly permitted to operate in San Francisco, ended in disaster, with a self-driving Cruise involved in a crash that caused serious injuries, leading to a statewide ban on the Cruise vehicles.
GM claims that the Cruise program actually had a nearly invisible footprint in the city, almost no personnel and generated very low sales. The auto giant said the city calculated its tax bill based on GM’s global revenue of $3B.