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How a controversial tax proposal is further dividing San Francisco

| Jul 3, 2016 | Tax Controversies |

While many people envision San Francisco as a primary destination for tech companies and one of America’s most thriving metropolitan areas, this wasn’t necessarily the case just a few years ago. Indeed, during the height of the recent recession the city saw an unemployment rate close to 10 percent.

In an attempt to help rectify this situation, city leaders devised back in 2011 what later became known in some circles as the “Twitter tax break,” whereby those companies willing to set up shop as anchor tenants in an especially dilapidated section of the neighborhood known as the Tenderloin would receive a generous payroll tax break.

Multiple companies — including Square, Uber and, of course, Twitter — took advantage of the deal and, over the years, the area has experienced a renaissance.

This revitalization come at something of a cost, however, as non-profits and lower income residents found themselves being priced out of the area, starting a process that has since played out in other neighborhoods across the city.

As you might imagine this situation has resulted in considerable enmity with city leaders attempting to find some sort of solution that satisfies both long-time residents and the tech companies helping fill the city’s coffers.

Interestingly enough, the depth of the divisions in the city were laid bare this week after Supervisor Eric Mar introduced a controversial new tax proposal calling for tech companies with gross receipts of more than $1 million to be subject to a 1.5 percent payroll tax.

Under Mar’s proposal, known as the Fair Share measure, the proceeds gathered from the tax — estimated to be roughly $120 million — would be used to subsidize affordable housing, combat homelessness and assist small businesses.  

While supporters are applauding the measure as necessary to preserve the diverse fabric of San Francisco, others in the business community have derided it as shortsighted and potentially damaging to the city’s long-term interests.

In order for Mar’s measure to secure a place on the upcoming ballot, he requires the support of six fellow supervisors by early August. Thus far, it remains unclear whether this will happen.

Stay tuned for updates …

If you are an individual or small business owner who would like to learn more about how to remain compliant with both state and federal tax laws, consider speaking with an experienced legal professional.

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