As the city moves closer to the end of its fiscal year and a half-a-billion dollar budget deficit, there is one thing everyone agrees on: economic recovery must begin with jobs. That is why the Board of Supervisors should schedule, hear and approve three pending tax proposals that will create jobs and jumpstart San Francisco’s economy.
In his State of the City address three weeks ago, Mayor Newsom declared jobs and business development the top priorities as the city faces double-digit unemployment and 80,000 jobs lost in 10 years. He announced three tax initiatives to encourage businesses to create jobs, provide health care and locate in San Francisco.
As a package, the Mayor’s three tax proposals make economic sense for San Francisco. Today, the city relies primarily on payroll taxes to generate revenue from the private sector. The more jobs business creates, the more tax revenue the city collects. This serves the city well in times of boom, but leaves city coffers lacking in times like these. While there is discussion about changing the tax structure to incentivize rather than penalize jobs, today’s system depends on a healthy base of private-sector jobs.
The first of the Mayor’s proposals will waive the payroll tax on all new hires for two years. Many businesses want to expand, but delay hiring due to market and regulatory uncertainty. This incentive will provide some predictable savings and inspire businesses to invest in the human capital needed to expand now. The broadest reaching of the Mayor’s proposals, this exemption is also a huge incentive for businesses to relocate to San Francisco.
The second proposal will give a $2,000 annual tax credit to small businesses that are required by city law to provide health coverage for their employees. This credit will provide huge relief to small businesses who have seen local mandates increase the cost of an entry-level employee 40 percent over the last five years. With this short-tem tax relief measure, small businesses will be able to focus on growth and hiring.
The final proposal extends the 7 1/2-year payroll tax exclusion until 2014 for biotech companies that begin operations in San Francisco. Previously set to expire next year, this extension will incentivize even more businesses from one of the nation’s fastest growing and high-paying industries to locate in San Francisco. Attracting more companies – and their jobs – will also help solidify San Francisco’s place as a global leader in biotech.
This package of incentives will provide a needed break for small businesses and cutting-edge start-ups already struggling to make payroll, and accelerate the hiring decisions of businesses weathering the economic storm.
Under our current tax system, we will have no economic recovery until we put people back to work – period. President Obama knows this and has proposed payroll tax credits as part of a federal stimulus package. The Board of Supervisors should see the need and act quickly to schedule a hearing for these important measures that will give businesses a reason to add new jobs in San Francisco and return the city to financial health.