Bid for San Francisco Income Tax Fails

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By Joyce E. Cutler

San Francisco voted down a resolution late Feb. 28 that would have asked the California Legislature to change state law so that localities could impose local corporate and personal income taxes.

The proposal requested that state lawmakers amend Rev. & Tax. Code Section 17041.5 so that San Francisco could create new revenue sources to fund “Sanctuary City policies” in the face of threats by the Trump administration to pull local funding, among other initiatives. In addition, operational and capital costs of providing health and human services are expected to dramatically increase with the threatened repeal of the Affordable Care Act, the resolution said.

Eight votes were needed to pass the measure, which failed 7-3 with one supervisor excused hours before the vote.

If state law changed to allow such a proposal, “it would still require a vote of the people,” Supervisor Aaron Peskin said, referring to a state law requiring that citizens must approve tax measures. “I want to be clear we should have all options on the table.”

Peskin couldn’t be reached for comment on whether the measure could be reintroduced.

The tax could have hit hometown companies including Airbnb Inc., Twitter Inc., Uber Technologies Inc., Gap Inc. and Salesforce.com Inc.

Strong Economy

“Any new tax proposal, whether it’s business or individual, has to be carefully crafted so as to not cost San Francisco jobs and the economic vitality that we have in the city since the great recession,” Jim Lazarus, San Francisco Chamber senior vice president for public policy, told Bloomberg BNA.

“This city’s booming—3 percent unemployment, more population, more jobs and lower unemployment than we’ve ever had in the city, so something’s right,” he said. “A bad tax policy is always a good way of screwing it up.”

Some 170 cities levy municipal income taxes, which the resolution called a “valuable and reliable source of revenue.”

Prior Attempts

Precedent for a resolution like this exists, Peskin said, pointing to a 2003 failed bill by then-Assemblymember and former San Francisco Supervisor Mark Leno (D).

The Los Angeles County Board of Supervisors in May 2016 tried and failed to get state lawmakers to change the tax code so the county could ask voters to tax personal annual incomes above $1 million to combat homelessness.

San Francisco “continues to look for progressive revenue sources to fund the transportation and health and human services needs of the City’s growing population” amid threatened withdrawal of federal funds that adopted sanctuary city policies, the resolution said.

The city in January also joined a movement, started in Portland, Ore., to aim business tax surcharges at companies with chief executive officers whose compensation is 100 times greater than their median workers’ pay.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the resolution is at http://src.bna.com/mCv.

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