San Francisco Mayor Ed Lee and Supervisors David Chiu and Jane Kim are proposing to exempt companies moving to the Tenderloin neighborhood from the city’s 1.5% payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. for six years. The taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. break would apply only to new hires.
The goal of this plan appears to be designed to lure Twitter to relocate to the Tenderloin from their current location south of Market Street. Twitter is looking to expand and is “bursting at the seams” in its current location, and has reportedly looked at relocating to Brisbane, CA, ten miles south of San Francisco. The San Francisco Board of Supervisors is proposing a geographic tax incentive to entice Twitter and others to relocate and develop the notoriously inhospitable Tenderloin district.
If San Francisco needs to exempt businesses from its payroll tax to attract investment, maybe the payroll tax as a whole should be looked at instead of offering temporary fixes to politically connected companies. Why should only companies in the Tenderloin district, or companies that threaten to leave town, get the break? Specific and targeted tax incentives are not good tax policy and, although they may work in the short-term, a more fundamental reform is preferable in the long run.
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