Business tax measure becomes polarizing plan 

Supervisor David Chiu’s proposed ballot measure to restructure The City’s current business tax so commercial rents are taxed has already started to divide the business community.

This week, Chiu introduced a measure that would reduce the 1.5 percent payroll tax for employees who earn less than $85,000 and offer payroll tax credits. And, it would impose a new gross-receipts tax on commercial rents.

A tax on commercial rents “is better for the economy because it actually spreads the business tax across more taxpayers,” Chiu said this week.

Currently, many businesses, including banks or insurance companies, do not pay business taxes. They would begin to if landlords start passing the new tax onto tenants.

Chiu is quickly gaining the support of small businesses that have been burdened by the current payroll tax. There are 80,000 businesses in San Francisco, but only 6,000 are required to pay the 1.5 percent payroll tax. Those businesses say the payroll tax has slowed hiring at a time when The City is facing nearly a 10 percent unemployment rate.

“We have so many businesses that don’t get taxed,” said Kathleen Dooley, a small-business owner and member of the Small Business Commission. “It would allow smaller businesses free to hire; people do hesitate to hire because of [the current payroll tax].”

On Monday, the Small Business Commission will discuss and take a vote on the ballot measure, which still needs six votes from the Board of Supervisors. The revised tax structure would generate as much as $30 million, according to the proposal.

Other business leaders, however, claim the tax proposal is a “lose-lose” for all business. It may seem appealing to have the payroll tax reduced, but it comes at the expense of all businesses in The City, said Steve Falk, president and CEO of the Chamber of Commerce.

“It’s a classic case of divide and conquer,” Falk said. “You put a small benefit for one group of businesses hoping to get their support, then clobber another group of businesses with a new tax. I don’t think the business community is going to fall for it this time.”

esherbert@sfexaminer.com

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