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Board approves temporary payroll-tax exclusion for small businesses in bill passed on first reading
Summary
The San Francisco Board of Supervisors voted to pass on first reading an ordinance creating a temporary payroll expense exclusion for small businesses with payroll under $500,000, intended to spur job growth through February 2015; the measure passed 10-1 after debate over budget impacts.
The San Francisco Board of Supervisors on June 12 passed on first reading an ordinance to permit a payroll expense tax exclusion for small businesses that expand net new payroll between 2012 and 2015.
Supporters said the measure is aimed at job growth among neighborhood firms. Supervisor David Chiu (presiding) and Supervisor Chris Farrell, the ordinance sponsor, framed the change as an incentive for micro- and neighborhood businesses to add staff. "Our small business community is the heart and soul of our city," Supervisor Farrell said, adding that the exclusion applies to businesses with payroll under $500,000 and would allow an expansion of up to $250,000 exempt from the city’s payroll tax through February 2015.
The ordinance drew sustained questioning about the budget effect. Supervisor John Avalos said the city controller had estimated an annual revenue reduction of roughly $2 million and implementation costs of about $150,000 to the Treasurer-Tax Collector. "This reduction has not been assumed in the budget that's currently before the finance committee," the controller’s deputy Monique Zamuda told the board.
Supervisor Avalos voted against the ordinance, saying the city should avoid creating an unbudgeted hole that could force cuts to public safety, transit or safety-net services. Supervisor Farrell replied that he viewed the measure as a prioritization: "It's $2,000,000 to create hundreds of jobs annually here in San Francisco," he said.
The measure passed its first reading by roll call vote: 10 ayes, 1 no. The ordinance text, as adopted on first reading, exempts qualifying net-new payroll from the existing payroll tax through Feb. 2015 and includes labor-compliance language supervisors said would prevent firms with labor-law violations from claiming the benefit.
What happens next: the ordinance was advanced on first reading and will return for further action and final passage per the City's legislative schedule. The board’s debate reflected a split between prioritizing near-term job incentives for small neighborhood employers and concern about the immediate budgetary cost and how it should be covered.
Ending note: Supporters emphasized the measure as an immediate signal to small employers; skeptics pressed for explicit budget offsets or larger contributions by very large employers.
