Tax plan altered to reduce expense, gain support 

Mayor Gavin Newsom said he’s scaling back his current tax break plan, making it less expensive and more beneficial to small businesses.

Newsom’s staff met on Wednesday to draw up a list of amendments that the mayor will take to the Board of Supervisors for consideration. The board’s Budget and Finance Committee held a public hearing on the proposal, where union leaders expressed opposition to Newsom’s tax plan, comparing it to the failed federal bank bailouts.

The committee will continue discussions next week.

The current proposal, which is intended to encourage job growth, consists of a two-year payroll tax “holiday” for new hires. A recent economic analysis showed that while the proposal would create as many as 4,330 jobs through 2011, it also would increase The City’s budget deficit by $72 million during the two-year period.

Newsom has remained tight-lipped about specifics, but said he’s considering options like whether the tax exemption should be limited to San Francisco residents or possibly target it to specific industries, said Tony Winnicker, a spokesman for the mayor.

An economic analysis showed that if The City capped the maximum tax credit at $10,000 per business, it would cost $33 million while creating 1,995 jobs during a two-year period.

“I never believed for a moment that the proposal as is would get the support of the board — quite the contrary,” Newsom said. “We have asked for amendments that we offered quietly to members of the Board of Supervisors to consider.”

Scaling back the tax break plan would help garner more political support among supervisors who do not want to add to the $522 million budget deficit, which would mean more cuts to city services and layoffs.

“I would not hold our breath,” Supervisor David Chiu said of the current tax plan. “If we are going to add to [the budget deficit] to the tune of $72 million over the next two years, we have to be extremely sure those monies are well spent and I’m not convinced that this specific proposal will do that.”


Taxing proposal

4,330 Jobs proposed tax break would create through 2011
36,000 San Francisco jobs lost in past two years
$72 million Two-year cost to city of proposed tax break
$522 million Projected deficit for 2010-11 fiscal year

Source: Office of Economic Analysis

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