A stern attitude toward the tech industry has emerged on the San Francisco Board of Supervisors — the most progressive in recent history — as some members look to tax an industry for problems they say it helped cause.
In the past year alone, board members have supported a tax on big businesses to raise money for homeless services, decided not to renew a tax break for certain companies — many of them tech — in Mid-Market and begun crafting a proposal to tax ride-hailing companies. Now, on Tuesday, Supervisor Gordon Mar will officially propose a tax on IPOs to raise money for programs that address income inequality.
Taken together, these policies provide a window into how much the current board blames the tech industry — fairly or not — for the city’s stubborn homeless crisis, soaring rents, jammed traffic and inflated property values that are driving residents away.
“Part of this is a knee-jerk reaction … around San Francisco’s homeless issue and housing crisis,” said James Taylor, a political science professor at the University of San Francisco. “But it’s also part of the deeper tension around the soul of the city, which has been evident in City Hall politics for years.”
The board’s eagerness to impose new taxes on the tech industry is a stark departure from just eight years ago when San Francisco was crawling out of the Great Recession. The board at the time supported a number of tax policy changes to keep companies in the city, including the so-called Twitter tax break that gave companies, such as Twitter, a payroll tax break if they moved to the city’s seedy Mid-Market district.
That tax break passed the board 8-3 in 2011. Eight years later, as the measure hits its sunset date at the end of the month, not a single member of the current board is calling for an extension.
“A lot of them (the supervisors) think that the tech industry has really benefited from San Francisco and the nature of the city in the last 10 years, and now it’s time for them to give back,” said longtime political consultant Jim Ross. “It’s a real statement of values for San Francisco and of what the city wants to see from businesses and how they operate here.”
Now, as a wave of companies plan to enter the public markets this year, Mar wants the IPO tax to help offset the “negative impacts” that the sudden injection of wealth could have on the city. His proposal, which would levy a 1.12% stock-based compensation tax on public companies, will need five other votes from his colleagues to reach the November ballot. Then it would need to pass by a two-thirds vote.
“Our city is in such a different place in terms of what our priorities are,” Mar said. “It’s less about growing the economy and keeping jobs in the city. In 2019, it’s more about ‘how do we address these major problems that we experienced by the growth of the tech sector?’”
So far, 2019 is on track to be the biggest year for initial public offerings in recent history. Lyft and Pinterest made their Wall Street debuts earlier this year, and Uber is expected to thunder into the public market this week with a reported $100 billion valuation. Major tech companies such as Slack, Cloudflare and Postmates also plan to go public this year.
San Francisco Chief Economist Ted Egan estimates that the Lyft, Pinterest and Uber IPOs alone will generate so much wealth that the city could see a 0.5% to 1.9% increase in its already sky-high housing prices.
The arguments that have emerged since Mar announced his tax proposal last month are similar to those during the campaign for November’s Proposition C, which asked voters to tax big businesses to raise money for homeless services. In both cases, supporters say the tax is a fair way to mitigate the city’s gaping wealth disparity, while those against it worry that the additional tax would push companies out of the city.
Prop. C passed with more than 60% of the vote, though the money is currently held up by legal challenges.
“San Francisco has benefited from this growth, and it also hasn’t necessarily collected on this growth,” said Rodney Fong, CEO of the San Francisco Chamber of Commerce. “There’s a finite amount that you can tax an existing business in San Francisco, and we have to be very careful about that. These are very fragile businesses, whether they are big or small.”
Similar arguments also may emerge around the ballot measure Supervisor Aaron Peskin plans to propose this year, which would tax net fares of Uber and Lyft rides between 1.5% and 3.25%, depending on the type of ride. The two ride-hailing companies agreed to support the ballot measure in exchange for the supervisor scrapping a previous proposal that would have asked voters to tax ride-hailing companies’ gross receipts at rates up to 0.975%. Mayor London Breed also supports the measure.
But Peskin said Uber and Lyft’s support of his measure is a sign the tech industry realizes its responsibility to the city. He also pointed to Salesforce CEO Marc Benioff being a major donor to Prop. C.
“As these companies become more politically mature, they realize that San Francisco is not just a place to be mined, but a society they need to help function,” Peskin said.
Peskin said the myriad tax measures aren’t a sign of the board’s unfriendliness to the tech industry, but rather a natural course of the city’s economy.
“We are in a very different economic time,” he said. “We all know the facts. And the facts are that the employees of this industry are very well paid, and that is a driver of housing costs in San Francisco.”
As Mar and Peskin’s ballot measures make their way through the board, Jennifer Stojkovic, executive director at sf.citi — which represents a number of tech firms in the city, such as Airbnb, Uber and Lyft — said the companies plan to engage with the supervisors.
“The key here is that we just want to make sure that San Francisco elected officials know we are here and we are engaged, and want to be part of the solution,” she said.
While she said many of her members want to stay in San Francisco, they still need to look out for their bottom lines.
“It’s important for us to understand that our companies and their employees don’t want to move,” she said. “We’re invested here, and we want to make sure we can stay here. But at the end of the day, if it becomes inhospitable, they (the companies) have shareholders they need to respond to.”