Eliminating San Francisco’s unique tax on stock options could cost San Francisco between $500,000 and $750,000 a year in tax revenue, according to a joint report from the Controller, Tax Collector, City Attorney, and the Office of Economic and Workforce Development.
The full impact of reforming The City’s tax code may never be known because the treasurer’s office does not differentiate between taxes on different types of compensation, such as salary, benefits and stock options. But by surveying 14 companies that have gone public since 1997, researchers found that the average tax on stock options ranged from $39,000 to $685,000 per company.
The highest amount of tax paid by a technology company never exceeded $685,000, although a company such as Twitter could easily break that record with an initial public offering estimated in the billions.
Currently, there are two pieces of legislation that would eliminate stock option taxes. Supervisor Ross Mirkarimi’s legislation would apply only to technology companies and last for three years while Supervisor Mark Farrell’s legislation would be permanent and apply to a wider range of industries.
The study’s main author, city economist Ted Egan, recommends changing Mirkarimi’s legislation so that it lasts at least six years and so that it doesn’t single out technology companies. He also recommends a cap on such taxes instead of an outright moratorium, saying that companies have gone public in San Francisco.
“Finally, the research conducted in this report suggests that while Supervisor Mirkarimi's legislation will have a relatively small cost to the General Fund, it could be made more efficient by capping the stock option tax instead of eliminating it completely."