San Francisco Considers Tax Break for Twitter

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 tax for six years. The tax 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.