San Francisco 'Tech Tax' Proposal Shows 'Deep Divide' In the City

One of San Francisco's lawmakers proposed a new tax on Tuesday that would be levied only on tech companies in the city. "It is time for San Francisco," said Supervisor Eric Mar, "to require big technology companies to pay their fair share."

Citing a previous tax break that some tech companies received and blaming tech companies for contributing to the city's affordability problems, Mar announced that the 1.5% payroll tax — the so-called Fair Share measure — would raise an estimated $120 million, which would be dedicated to fighting homelessness and funding affordable housing, as well as lowering costs for small businesses. The lawmaker has the support of two fellow progressives but will need the support of six supervisors by early August to get the measure on the ballot.

Critics and more moderate lawmakers were quick to call the proposed ballot initiative "ludicrous" "job-killing" and emblematic of a "deep divide" in a city struggling with economic inequality. "This would be penalizing an industry that has led to the lowest unemployment rate in the country," Alex Tourk, a spokesperson for sf.citi, an advocacy organization for tech firms in San Francisco, told TIME Wednesday. He described the proposal as "San Francisco politics at its worst," flicking at the notion that the ballot measure might increase progressive turnout at the polls in November.

This is the latest flare-up in a political battle that has been going on for years in San Francisco, with locals who are angry about the rising costs of living — and changing culture of the city — focusing their ire on an industry with unmissably affluent players. As middle class workers have been priced out, tech workers more able to pay for $3,500 one-bedroom apartments have flowed in. City leaders have tried to keep the peace between long-term residents and young companies that have brought thousands of jobs and millions of dollars in revenue to San Francisco.

"The proposal reflects the deep divide in our city as a few have prospered while so many are pushed out by rising costs," Supervisor Jane Kim told TIME in a statement about the "tech tax" proposal. "There is a growing problem that requires creative solutions that we can all support regardless of the industry in which you work."

Other lawmakers argued, as they have before, that the anger at tech firms and their growing army of well-compensated employees is misplaced and misguided. "Our housing crisis is the result of decades of not creating enough housing. The crisis won’t be solved by chasing good-paying, good-benefits jobs in one targeted industry out of San Francisco," Supervisor Scott Wiener said in a statement.

The tax break Mar alluded to, which was labeled by critics as the "Twitter tax break," was a deal brokered five years ago when the unemployment rate was almost triple the current low of 2.9%. Companies were offered a break on payroll taxes as an incentive to move to a stretch of Market Street, a blighted central artery, with hopes that they would serve as anchor tenants to revitalize the area. At the time about a third of storefronts were vacant. Twitter took the deal. Others, like Square and Uber, followed, with some choosing not to take the break.

But as new shops opened, non-profits and poorer residents were pushed out. And what Mayor Ed Lee and other city leaders heralded as a great success for the neighborhood known as the Tenderloin, protesters mocked on signs as they blocked so-called "Google buses," a generic term for shuttles that ferry workers from homes in San Francisco to jobs in Silicon Valley. Protesters rallied outside Twitter's headquarters. “Twitter you’re no good,” hundreds of union workers shouted outside the headquarters in 2014. “Pay your taxes like you should."

In a statement to TIME, the mayor's press office recalled the different situation that the city was in several years ago. "This job-killing ballot measure puts San Francisco’s economic stability at risk and will return this city back to the days of the Great Recession — when unemployment was nearly 10% — just as an the national economy is softening ... Rather than scapegoat a sector of our economy, we should be working together to find solutions to housing and homelessness."

Mar stated to TIME that it was "time for San Francisco — five years into our tech boom and housing crisis — to ask the tech companies to pay their fair share, and I believe voters will agree."

He added: "Our housing crisis in San Francisco is the biggest threat to our economic health and stability. This Fair Share measure will help bring more stability and economic vitality to small businesses and our neighborhoods."

The measure would not apply to companies with gross receipts of less than $1 million, but sf.citi's Tourk says it's unclear which companies or how many would be affected. Though economists have said that the reasons for San Francisco's housing problems are complex — linked to factors like the influx of wealth, limited space on the peninsula, as well as the local politics that have resisted building new housing in order to preserve the character of the city — Mar's language implies more of a one-to-one equation. He describes the impetus for the initiative as "the technology-driven housing crisis" in the ballot language.

"Any San Franciscan understands the reality of rising costs of housing and the perception of a widening gap that is not only happening in San Francisco but in cities across the country," said Tourk. "In my opinion, this is not a thoughtful approach. It's another way to divide two constituencies."

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