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Controller outlines gross-receipts tax proposals; advocates and businesses weigh costs and jobs trade-offs
Summary
The Controller's Office presented competing proposals to move San Francisco from a payroll-based business tax to a phased-in gross-receipts system with progressive tiered rates. Two versions would generate different registration-fee revenues ($13M vs $40M); the Controller projected net job gains over 20 years but stakeholders differed sharply in public comment. The committee agreed to send both measures to the full Board without recommendation.
Controller’s Office economists presented detailed economic-impact modeling for two competing business-tax proposals that would replace or phase out the payroll expense tax with a phased-in gross-receipts tax and a new registration-fee schedule.
Ted Egan of the Controller’s Office summarized key features: six industry schedules with marginal rate tiers, a $1,000,000 gross-receipts small-business exemption (with modified treatment for residential lessors), apportionment rules for multi-jurisdiction businesses, and exclusions or credits for certain industries (including conversion of select payroll-based exclusions into gross-receipts credits). The proposals phase in gross-receipts rates from 10% in 2014 up to 100% in 2018 while reducing the payroll tax commensurately to keep the transition revenue-neutral in aggregate during the phase-in.
The mayor/President Chu proposal includes a registration-fee structure designed to raise about $13,000,000 in additional registration revenue; Supervisors Avalos and cosponsors offered an alternative that raises about $40,000,000 via a different fee schedule. Controller modeling projected both proposals would broaden the tax base (in the city’s simulation somewhat more payers) and produce net job gains over 20 years (roughly 2,050 jobs under the mayor’s package and about 1,765 under the Avalos package), while acknowledging distributional shifts among sectors. The Controller and the Budget Analyst emphasized administrative complexity and estimated the Treasurer’s Office incremental implementation costs at $3M–$6M per year.
Public comment was extensive and split: several small-business and auto-dealer representatives warned about high gross receipts and low margins in certain retail sectors (for example, auto dealerships), while labor, housing and progressive-revenue coalitions urged support for the higher-revenue Avalos version and for linking fees to CPI escalation.
Given the remaining policy decisions (especially registration-fee structure and retail schedule adjustments), the committee voted to refer both measures (Items 11 and 12) to the full Board without recommendation, and held hearings for the transfer-tax proposals. Staff and sponsors said they would continue to negotiate toward a single consolidated measure for the November ballot if possible.
Next steps: both measures were sent to the Board for further deliberation and sponsor offices and the Controller indicated ongoing stakeholder outreach to refine schedules and registration fees.
