San Francisco will hire business expert to overhaul payroll tax 

After years of failing to overhaul San Francisco’s much-criticized payroll tax, The City now plans to invest $100,000 into a new position to come up with the answer.

The Board of Supervisors Budget and Finance Committee voted unanimously Monday to beef up the city controller’s economist division with the addition of a third economist. The new position is being added after Mayor Ed Lee closed a $306 million deficit by cutting other services.

The new hire will be tasked with crafting a business tax reform proposal that will be the basis for a November 2012 ballot measure.

San Francisco is the only city in California with a 1.5 percent payroll tax, which has been criticized as a penalty for hiring workers and a disincentive for companies to grow and remain in town.

Budget analyst Harvey Rose had questioned whether the overall workload of the economists’ office has increased to justify more staff.

But City Controller Ben Rosenfield said the new position is “at the heart” of being able to deliver a successful business tax proposal.

“It has been studied in different times, in different ways during the last decade and we have yet to find a solution,” Rosenfield said.

The position is part of the mayor’s $6.8 billion budget proposal, which is under review by the board. On Monday, members of the board’s Budget and Finance Committee resoundingly endorsed adding the new position to The City’s payroll.

“Our business tax reform is going to be a very important policy issue over the next year and a half,” said Supervisor Jane Kim. “We will need extra hands to help support that.”

The city controller’s economist division was created in 2004 with the passage of Proposition I, which required an economic impact report on legislation coming out of the Board of Supervisors.

The San Francisco Chamber of Commerce, often at odds with the progressive majority that controlled the board at the time, later sued The City for dragging its feet in implementing the measure.

The economic analysis office now produces influential reports that can make or break legislation.

The findings played a key role in passing one of the recent controversial proposals to provide a payroll tax break for microblogging service Twitter.


Tax facts

How The City taxes businesses:

$250,000: Business payroll threshhold that triggers The City’s payroll tax

1.5 percent: Payroll tax paid by businesses that exceed that amount

$400 million: Approximate annual payroll tax revenue received by San Francisco

Source: City Controller

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