Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Payroll Tax Policy topic
No spam. Unsubscribe anytime.
Supervisors debate two payroll‑tax measures: small‑business health credit and new‑jobs exclusion
Summary
The committee extensively debated two proposed payroll‑tax relief measures: a $2,000 one‑time payroll tax credit for small businesses that comply with the Health Care Security Ordinance, and a broader payroll‑tax exclusion to spur hiring. Analysts warned of sizable general‑fund costs and urged further tailoring and enforcement capacity before adoption.
The Budget & Finance Committee spent the bulk of its Feb. 24 agenda examining two related but distinct proposals to use payroll‑tax policy to help San Francisco businesses during the downturn.
Item 1 — the small‑business payroll tax credit — would provide a one‑time $2,000 payroll‑tax credit for businesses with 20–49 employees that demonstrate compliance with the city’s Health Care Security Ordinance (HCSO). Jennifer Entine Matz of the Office of Economic & Workforce Development said the credit equates to exempting roughly $133,000 of payroll from the payroll‑expense tax and argued the measure is a targeted “carrot” to encourage compliance and help small firms that face $30,000–$70,000 annual compliance costs. Donna Levitt of the Office of Labor Standards Enforcement told the committee that while annual reporting suggests many businesses self‑report compliance, the office has a backlog of investigations and estimated it needs additional staff (five positions) to perform more compliance reviews.
Budget analyst Harvey Rose said the payroll‑tax credit in the draft ordinance could reduce city payroll tax revenues by an estimated $3.4–$4.08 million in 2010 (1,700–2,040 eligible businesses). Rose recommended a continuance until the Office of Labor Standards Enforcement could detail staffing and an appropriation to implement verification procedures.
Item 2 — a new‑jobs payroll exclusion — would cap a business’ payroll‑tax liability at 2009 levels for two years, effectively exempting payroll increases (including new hires) for 2010–11. Ted Egan, the city economist, presented modeling showing a large fiscal cost but a measurable jobs impact: his office estimated a net cost to the city of approximately $72–73.7 million for 2010–11 and projected 1,430 net jobs in 2010 and 2,900 in 2011; he recommended narrowing eligibility (for example, year‑over‑year growth requirements, hiring previously unemployed persons, or sector targeting) to reduce costs and increase the share of jobs that benefit San Francisco residents.
Committee members and public commenters were sharply divided. Labor and nonprofit speakers warned the measures would enlarge the city’s budget shortfall (the city projected a $522 million shortfall) and argued enforcement capacity and fairness concerns made the payroll‑credit approach premature. Small‑business representatives and the Chamber of Commerce urged targeted relief for neighborhood businesses and supported a tailored new‑jobs approach.
After extended Q&A and public comment, the committee voted to table Item 1 and continue Item 2 to the call of the chair so staff could return with tightened language, fiscal analyses and an administrability plan, including any staffing or appropriation needed for OLSE to verify claims.
