The proposed ballot measure would impose a 1.5 percent payroll tax on technology companies.
(TNS) -- Highly paid tech workers are often blamed for the city’s housing crisis. Now, three supervisors want to levy a tax on technology companies in an effort to make them pay for the city’s two biggest woes: the high cost of housing and homelessness.
Dubbed the tech tax, the proposed November ballot measure would impose a 1.5 percent payroll tax on technology companies. That would be a big shift. In 2012, 71 percent of San Francisco voters supported a measure to eliminate the city’s payroll tax and replace it with a gross receipts tax.
The proposed measure has a lot of ifs, including whether it will even make the ballot. It has three co-sponsors — Supervisors Eric Mar, Aaron Peskin and David Campos — but needs the support of at least six to qualify.
That will be an uphill battle. None of the five moderate supervisors is likely to support it, and one of the six progressives, Jane Kim, may be unwilling to take on tech companies while she is running for state Senate.
Should the measure make it to the ballot and pass, the city controller’s office estimates it would generate about $115 million annually. The measure doesn’t specify how the revenue would be divided between homeless services and affordable housing. That will be worked out during the committee process. As currently drafted, the measure excludes businesses that have gross receipts of less than $1 million.
Another unknown is what companies are deemed “tech.” Companies such as Facebook, Google and Twitter would ostensibly qualify, but dozens more potentially straddle the line, like Amazon.
The measure identifies tech companies by the type of tax code they use under the Internal Revenue Service’s North American Industry Classification System. Companies classify themselves. They may face penalties if a government audit finds they are misidentifying themselves.
Tax expert Leo Martinez, a professor at UC Hastings College of the Law, said identifying tech companies would raise numerous challenges.
“Clearly, that is going to be an area that is fraught. Whatever reference they use, there are always these line-drawing problems. I imagine the question of what is and what isn’t a tech company is going to be a hugely knotty problem to try and deal with,” Martinez said.
But just on principle, the proposal has already generated strong reactions.
“As a representative of an industry that has played a meaningful role in ensuring San Francisco has the lowest unemployment rate of any city in the country, I am appalled at the political vindictiveness of this proposed measure,” said Alex Tourk, a spokesman for San Francisco Citizens Initiative for Technology and Innovation, a coalition of tech companies.
Supervisor Mark Farrell called it “the worst idea I’ve heard in months.”
Deirdre Hussey, spokeswoman for Mayor Ed Lee, called it a “job-killing measure.”
She added that the measure “upends the grand bargain” made between business and labor that ultimately led voters to eliminate the payroll tax in 2012.
Mar, who conceived of the tax, said Tuesday that circumstances had changed so drastically since 2012 that it merited revisiting the issue.
“Its worked out great for the tech companies, and it hasn’t worked great for other San Franciscans,” he said. “It’s five years after this rapid tech boom with tens of thousands of new employees that make basically double the salary of the average San Franciscan employee. The measure is addressing this issue by requiring these big tech companies to pay their fair share.”
Perhaps the biggest surprise Tuesday was that Peskin is one of the measure’s sponsors. Just last week, he indicated he didn’t want to put it on the ballot. But on Tuesday he called it “good public policy.”
“The impacts that are caused by various activities in our society should be borne by the impactors,” he said. “This is the beginning of the public conversation that may or may not go forward in November but I think should be part of the public discourse.”
As for what changed between last week and this week, Peskin had one answer: “Good polling data.”
©2016 the San Francisco Chronicle. Distributed by Tribune Content Agency, LLC.