San Francisco Mayor Breed calls for tax reform to support post-pandemic economic recovery

In brief

In July, the San Francisco administration released a Memorandum (the Report) discussing recent trends related to San Francisco’s (the City) business tax system. The City imposes several taxes on businesses, which include Gross Receipts Tax, the Homelessness Gross Receipts Tax, the Commercial Rents Tax, and the Overpaid Executives Tax (collectively referred to as ‘the business taxes’ in this article). The Report stated that the City’s revised financial forecast projected larger future shortfalls than reported in January 2023. 

The Report also found that the City’s business tax revenue increasingly comes from a small number of large taxpayers; post-pandemic remote work has led to a reduced volume of leasing and sale of commercial properties, affecting the taxes generated by these transactions; and the “structural changes in the city’s economy, and policy choices to make the tax system more progressive, has had the effect of raising overall revenue volatility by concentrating revenue in a few payers,” which runs counter to the City’s goal of broadening the tax base.  

On the same day as the publication of the Report, San Francisco Mayor London Breed (D), along with members of the San Francisco Board of Supervisors, announced a desire to initiate tax reform with a goal of placing an initiative on the November 2024 ballot. The Mayor has requested that the Treasurer and Controller work with stakeholders, including the business community, by late 2023 so that a measure can be drafted in Spring 2024. In addition, the Mayor also introduced several taxpayer-friendly bills to the Board of Supervisors, two of which passed (see detailed explanation below). 

Next steps: There are several working groups and interested parties that are meeting to discuss what meaningful tax reform may be possible for the 2024 ballot initiative. Taxpayers should review their San Francisco business tax calculations and model the impact of potential reform initiatives that could affect their liability in the future and should engage in tax reform discussions, where appropriate.