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Beyond Chron
July 19, 2004

Copyright © 2004 Marc Norton

Tuesday, July 20, is the day the tax chickens come home to roost in Silly Hall. This is the day the stupervisors slug it out over the Mayor's tax and fee increases. The Mayor pretends to have a plan to "share the pain," but the only folks who will feel any real pain are poor and working class people. This is to be expected in a budget that pretends to preserve public services, but doesn't.

There are eleven billionaires in San Francisco who have combined assets of over $21 billion. There are seven San Francisco corporations that collected more than $140 billion in revenue last year. But Newsom isn't asking any billionaires or downtown big business types to ante up much of anything.

Here are the gory details.


The only item in the mayor's tax package that dings downtown is the proposal to reestablish a gross receipts business tax. San Francisco had a gross receipts tax for decades, until the majority of the supes, in their infinite diswisdom, disestablished it a few years ago. The demise of the gross receipts tax was the result of a lawsuit by the "Filthy 52," a consortium of San Francisco's biggest downtown corporations. Newsom was part of the supe majority that knuckled under to the corporate masters.

Now, the boys downtown having pocketed a cool $200 million or so as a result of their lawsuit and the spinelessness of the supes, have graciously consented to let the gross receipts tax come back for a little while. But only at the anemic rate of one-tenth-of-one-percent (0.1%), a third of the old rate for most businesses, and only for a limited time. To his credit, Supervisor Chris Daly has proposed boosting the new rate to 0.15%, but anybody expecting many other supes to go along with this modest proposal needs another think.

By my calculation, a new gross receipts tax at the rate proposed by Daly would mean that the City would make up what it has lost as a result of the business tax lawsuit about the year 2018. We'll never make it back at the rate proposed by Newsom.

There's more. Newsom's guys estimate that his gross receipts tax would bring in about $30 million a year. But, just in case the tax might bring in more, Newsom has amended his original proposal to mandate that the rate must go DOWN if it brings in MORE than $30 million. Not surprisingly, there is no mandated adjustment if the tax brings in LESS than $30 million. This guy is no slouch when it comes to protecting his pals.

Wait, there's still more. State law requires that the new gross receipts tax must be approved by San Francisco voters in the November election. Newsom's original proposal sunseted in five years. Since a renewal of the tax after five years would require voter approval again, the sunset clause means that downtown gets a free chance to kill the whole thing at the ballot box somewhere down the road. Bad enough, but now Newsom has amended his proposal to sunset in four years, instead of five. That could save his downtown buddies about $30 million.

Supervisor Tom Ammiano has proposed that the new gross receipts tax stay in effect at least until there is a replacement business tax that brings in the same $30 million per year. Good idea, but good ideas are a dime a dozen under the gold dome.


Wait, wait, wait. One more thing. As first reported in Beyond Chron, Newsom's original business tax proposal included a tax cut for biotech corporations, exempting the industry from the City's payroll tax. Ammiano termed this a "poison pill," as many voters might nix the gross receipts tax if required to swallow this bit of corporate welfare at the same time. Ammiano proposed to take the biotech tax cut out of the business tax proposal, and the Mayor, sensing problems ahead, decided to go along.

But the biotech guys are going to get more than one bite of the proverbial apple. Supervisor Michela Alioto-Pier, who was appointed by Newsom, is bringing a separate, ten-year biotech payroll tax exemption to the supes on Tuesday. Actually, Alioto-Pier came up with this scheme before Newsom introduced his business tax proposal. When Alioto-Pier had trouble getting her tax cut off ground zero, Newsom rolled it into his business tax. Now, it's Alioto-Pier's turn to take the point for the biotechies again.

In addition to having a biotech tax cut on the supes' agenda for Tuesday, the biotech lobbyists are pushing hard on the state level for tax breaks and other financial "incentives." It seems that the biotech industry is able to produce clones of tax cut proposals at a prodigious rate.

These guys don't lack for cheerleaders. None other than Jim Chappell, the big cheese at the downtown-oriented San Francisco Planning and Urban Research Association (SPUR), has solemnly declared, in an opinion piece in the SF Business Times, that a biotech tax cut is needed to save San Francisco from economic ruin. "The future of San Francisco depends on it," he wrote.

Newsom summed up the biotech industry's clout this way at their recent San Francisco convention, "You need tax incentives? You got it."


Perhaps the cruelest item on Tuesday's agenda is Newsom's proposal to raise the local sales tax. Sales taxes hit hardest at poor and working class people. In the bureaucratic language of the supes' Legislative Analyst, "The impact will likely be greater for lower income consumers with little or no savings and for whom higher consumer prices represent a larger percentage of their incomes."

If our sales tax is increased, San Francisco will join Alameda County and the City of Avalon on Catalina Island as the jurisdictions with the highest sales tax in the state. The local sales tax has been increased eight times since 1974, when it was a quaint 6.5%.

The new sales tax would also increase the price of already sky-high gasoline. So, take a bus. Oh yeah, they increased MUNI fares last year, didn't they? It seems the politicians just can't resist going after those of us on the bottom of the pile.

It is expected that the increase in the local sales tax will bring in more money than the new gross receipts business tax. As Daly has pointed out, the business tax increase is capped at $30 million per year, but there is no cap on the revenue the City might reap from the proposed increase in the sales tax.


While the sales tax proposal has gotten a little bit of media exposure, Newsom's plan to increase everyone's telephone bill by a buck a month has been largely unreported. This one doesn't even have to go before the voters, as it is technically a "fee," not a tax. So the hope at the hall is that it will slip in under the radar screen. They raised this same "fee" by 50 cents last year, and got away with it, so now they are back for more.

Perhaps it is a good idea to raise the telephone bill of the downtown guys, but why every poor Joe and Jane in the City? Why every struggling small business? Well, say the politicians, why not?

Oh, and funny thing, this increase is capped for the big business guys at $40,000 this year, and $55,000 next year, no matter how many phones they have. Ain't it a laugh the way they always want to limit the snatch from the guys with money in their pockets, but don't mind bleeding dry those of us living from paycheck to paycheck?


There actually are some good news items on the supes' Tuesday agenda, both having to do with MUNI.

As reported by Dean Preston in Beyond Chron, the supes will be considering a proposal to increase, at long last, the Transit Impact Development Fee (TIDF). This would increase the fee commercial real estate developers pay for MUNI service. Hopefully, this will pass. Next up, we hope, will be another visit to a proposal for a Downtown Transit Assessment District, so current commercial property owners (think Shorenstein) could start paying their fair share for MUNI service.

In addition, Supervisor Gerardo Sandoval has proposed a charter amendment that would put control over MUNI fare increases and service cuts back in the hands of the supes. MUNI was taken out of their control and put in the hands of wanna-be privatizers a few years ago. That's why we saw a fare increase last year and service cuts this year. We have the yuppies in Rescue MUNI and the SPUR folks (again), both backed by the Chamber of Commerce, to thank for the current mess. Let's hope the supes see the wisdom in Sandoval's proposal. More on this from yours truly in the near future...


Our current budget problems were not created by any act of nature. They were caused by real, live people, making a whole series of policy decisions.

The present destructive cycle goes back at least as far as the Reagan presidency. Our budget and public service woes have been compounded by every administration since then, Democrats most definitely included. The federal government has set the pace for both state and local governments, all of which repeatedly let the rich off the hook and sock it to poor and working class people.

And, sad to say, too many of our friends in the "progressive" movement -- including not a few union leaders and non-profit types -- have stood to the side and let the carnage continue.

Every time we dump a new tax or fee on poor and working people, we make things worse, not better. Every time we give PG&E or the Bank of America or the Gap or Shorenstein a tax break, they just grab it and start making plans to come back to the trough for more.

Too often, the political big shots making these decisions think, hey, we'll take what we can get this time, even if it means mugging little old ladies, but we promise to do better next time. And the same thing the next time...

Silly Hall in San Francisco is a mess, from top to bottom, from right to left. Shake it up, baby.