Dear sf.citi members,
Hope you all are doing well and hope you had a pleasant weekend.
I’m writing to you today to provide you with more details on the Mayor’s recently announced ballot measure to update the City’s business taxes, ensure critical funding for City services, and relieve pressure on small businesses. At this time, the Mayor has introduced two measures.
- One proposal will go directly to the November 2020 ballot. This proposal will include reforms to the Gross Receipts Tax, including the plan to unlock funding for both homelessness and childcare collected through Proposition C that is currently in litigation, and the relief for small businesses. The measure signed onto the ballot contains no significant tax increases other than those necessary to unlock the Proposition C taxes.
- Another proposal has been introduced at the Board of Supervisors to allow for additional collaboration and finalization. This measure will include the above elements as well as raising new taxes so that conversation can continue. This measure also rebalances business taxes so certain industries like retail are less impacted.
The goal is for there to be a single measure on the November 2020 ballot. Should the proposed measure pass in the November 2020 ballot, the plan would add approximately $300M to the General Fund for the upcoming two-year budget (FY 2020-21 and FY 2021-22) and $76M on an ongoing basis. Please see below for more information as presented in the Mayor’s press release.
Unlock Homelessness and Childcare Funding
The Business Tax Reform measure would unlock approximately $300 million in funds that businesses have already paid for the Homelessness Gross Receipts Tax (November 2018 Prop C) and the Commercial Rents Tax for Childcare (June 2018 Prop C). Additionally, the measure would allow this funding to be collected and distributed on an ongoing basis while litigation continues. It would do this by creating two “backstop” taxes that would provide sufficient additional general fund revenues for the City to refund businesses as necessary and provide some ongoing revenue in the event that the City loses pending litigation about the tax measures. The backstop taxes would be general taxes that would mirror the rates and exemptions from the Proposition C taxes for a period of 15 years.
Eliminate Payroll Tax
Mayor Breed’s proposal would immediately repeal the Payroll Tax and replace it with an increase of Gross Receipts Tax rates for most sectors. This change will simplify the tax system for businesses in San Francisco and promote job creation since the Payroll Tax generally disincentivizes hiring.
Small Business Relief
The measure includes several policies to alleviate financial pressure on small businesses and businesses that are struggling financially to operate in San Francisco. The measure would also expand the exemption for small businesses to include businesses with $1.5 million or less in gross receipts. Lastly, the measure will reduce business registration fees for business that have $1 million or less in gross receipts.
Measure Introduced at Board of Supervisors
The measure that Mayor Breed introduced at the Board of Supervisors is identical to the ballot measure described above, but also includes a proposed tax increase that would go into effect as the economy improves and provide tax relief for cost-sensitive industries. Over the coming weeks, Mayor Breed will work with the Board of Supervisors and the business community to finalize the tax increase component of the proposal.
Please note, as tomorrow is the deadline for measures to be introduced in order to be included in the November 2020 ballot, we still expect GRT introductions to be made on behalf of the Board of Supervisors and potentially from the Mayor, as well. We will keep you informed should we learn of any new information. In the meantime, please do not hesitate to reach out should you have any questions.
Thank you for your continued membership.
Jen
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