Progress elusive on single tax reform proposal 

click to enlarge Mayor Ed Lee and Supervisor John Avalos are both working on proposals for the business payroll tax.
  • Mayor Ed Lee and Supervisor John Avalos are both working on proposals for the business payroll tax.

Although agreement remains elusive on a single November measure to replace San Francisco’s business payroll tax with a tax on gross receipts, supervisors revised each of two competing proposals Thursday.

Significant changes are expected next Wednesday, when the Board of Supervisors Budget and Finance Committee must act to meet a July 31 deadline for the full board to place one or both of the dueling measures on the November ballot.

Right now, Mayor Ed Lee’s proposal includes a revenue-neutral gross receipts tax and a $13 million-a-year business fee increase, while a competing proposal from Supervisor John Avalos would generate another $40 million a year.

Lee continues to refine his proposal to build consensus with the business community while he also talks with Avalos. People supporting tax reform want a single measure to ensure its passage. Competing measures, or one measure lacking broad consensus, would dim any hope of approval. People involved in the talks sounded optimistic.

“I think we are close to reaching a broad-based agreement on reforms,” said Jim Lazarus, public policy director for the San Francisco Chamber of Commerce.

Lee has made it a priority to do away with San Francisco’s 1.5 percent payroll tax, the only one of its kind in California. The tax is maligned by employee-heavy industries such as tech and hospitality as a “job killer” that discourages hiring.

The mayor’s measure — a tax on gross receipts with rates tailored by industry — would generate as much as the payroll tax, about $410 million. It also would include an increase in business registration fees to generate $13 million more for housing needs.  

Avalos said The City needs more money to fund infrastructure, Muni, parks and schools. “He hasn’t said no, but he hasn’t said yes,” Avalos said of his talks with Lee.

Tony Winnicker, a senior adviser to Lee, said the mayor continues to discuss his measure with impacted businesses and plans to make adjustments next week. Those could include tax rate changes for the commercial real estate industry and a final decision about how The City defines gross receipts for financial services.

“Our first priority on this is to reform our business tax so that we don’t tax jobs,” Winnicker said. “We understand there are supervisors for whom revenue discussions is a priority. We want to continue to first focus on the overall rates structure and as fair a package as possible.”

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