San Francisco business tax breaks skyrocket in second year 

click to enlarge EVAN DUCHARME/S.F. EXAMINER FILE PHOTO
  • Evan DuCharme/S.F. Examiner file photo

San Francisco's business-tax breaks increased by about $10 million last year as the exemptions city officials carved out to promote the technology industry and boost hiring are attracting more interest.

From a mid-Market Street incentive for Twitter to an initiative to encourage smaller employers to hire more, the total amount of tax breaks was $14.1 million last year. In 2011, tax breaks totaled $4.29 million.

The City rolled out the breaks to help stimulate the local economy, which is now doing so well that San Francisco's "good-times" tax credit also was triggered. That means businesses received up to a $500 tax refund because business-tax collections grew by more than 7.5 percent; last year they grew by nearly 12 percent.

The tax credit has not been triggered since the dot-com boom of the late 1990s.

Finely tailored tax breaks continue to spark debate in San Francisco and other cities nationwide. At issue is whether they are wise policy to stimulate the economy, with questions over fairness and revenue loss. There are seven in place in San Francisco.

The mid-Market area in particular has seen an influx of businesses taking advantage of a tax break enacted in April 2011. That year, two companies comprising 219 employees received a combined $34,761 tax break.

But last year, that grew to 14 companies comprising 2,562 employees with a tax break of $1.9 million.

The City does not reveal the names of the companies that receive the tax break, citing the tax code that deems the information confidential.

As The City was encouraging technology industry growth, it also enacted a tax break on stock compensation. In 2011, one company with 1,975 workers received a break of about $1.5 million. That grew to $3.35 million in 2012, with two companies receiving it.

Supervisor John Avalos reiterated his broad stance on tax break policy Monday in light of the new information.

"When you compare the profits these businesses have made with what they didn't pay in taxes, it's not asking a lot for them to pay their fair share like everyone else," Avalos said.

Last year was the first of five years of the payroll-tax break for "net new payroll." Supervisor Mark Farrell, who introduced the legislation to create the break, said the numbers show it's successful in encouraging job creation. Last year, 1,672 businesses received some portion of the $2.18 million total tax break offered under the initiative.

"This is tax revenue that would not have been there had we not had this legislation in place," Farrell said of his measure, acknowledging that some businesses might have hired anyway.

Break time

San Francisco’s business-tax breaks jumped by about $10 million in 2012.

2011 2012

Tax break type Businesses Break Businesses Break

Stock compensation 1 $1.509M 2 $3.35M

Net new payroll 0 0 1,672 $2.18M

Mid-Market Twitter 2 $34,761 14 $1.9M

Biotechnology 28 $1.506M 26 $1.6M

Clean technology 22 $863,453 22 $1.15M

Enterprise zones 115 $379,209 149 $593,013

“Good times” tax credit 0 0 6,781 $3.39M

Total 168 $4.29M 8,666 $14.1M

Source: San Francisco tax collector

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