San Francisco Raises Taxes on Tech Firms
To make their city more attractive and reduce the number of displaced people lining the streets, San Francisco invited tech firms to set up shop within the town. The aim was to bring about the gentrification of the less desirable districts, and while the tech firms did come to settle in the city, the promised uplift never materialized. At its recent post mortem for the Twitter tax break, city officials put their foot down on any future deals with tech companies.
The 2011 tax break legislation came into being at a time when the city was coming out of recession. The intention was to increase tech’s footprint in the town. Since then, San Francisco has lived up to the hype, as more and more tech startups settle within the city’s limits. The area where the tech firms set up shop was predicted to see a massive increase in its desirability, despite previously being known for drug abuse and homelessness.
Taxes for Tech Forthcoming
This year alone, the city has proposed three new taxes that will impact tech startups. Rideshare services will have to pay a fee per ride offered, which rideshare companies Lyft and Uber intend to add as a surcharge for their service. Stock-based compensation from tech shares will also be taxed, and companies will be subject to a tax based on the gap between their CEOs and their employees’ rate of pay. The intention is to utilize that money to alleviate the social ills that the tech companies were supposed to have done when they set up shop inside the city.
Critics of the tax note that the stream of income is wholly dependent on the profitability of these tech companies. San Francisco is notorious for not being able to maintain its revenue streams when recession strikes. While it is in a position to play hardball with tech companies now if the economy begins to contract, it may find itself in a completely different situation. If any of the tech companies the tax affects decides to restructure to deal with it, the city could face a decline in its expected revenue.
