This Tuesday, the SF Board of Supervisors approved new rules stating that small businesses in San Francisco that create new jobs or give their existing employees a raise or increase in hours will get a break on their payroll tax. Mayor Lee is expected to sign this legislation into law, which would be effective for four years, expiring after 2015.
Businesses with annual payrolls under $500,000 can expand their payroll by as much as $250,000 without having to pay any additional taxes. The business tax rate is set at 1.5% and the maximum potential savings for each business would be $3,750 a year. This exemption would reduce the city’s payroll tax revenue by an estimated $2 million a year according to a projection by the city’s chief economist, Ted Egan. Sponsors argue, though, that the trade-off is the creation of more jobs and putting more money in people’s pockets, which is sure to benefit the city in other ways.
Supervisor David Campos, a co-sponsor, describes the tax break as a matter of fairness. He says that since the city extended a payroll tax exemption to businesses that relocate to the Mid-Market area, businesses that include tech giant Twitter, small businesses deserve the same opportunity. “It makes sense for us to make sure we send a clear message that we do value our small businesses,” Campos says.