‘Tech tax’: San Francisco mulls plan for taxing the rich to house the poor

‘Tech tax’: San Francisco mulls plan for taxing the rich to house the poor

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Published by The Guardian July 1, 2016

San Francisco’s long, complex and often fraught relationship with the tech industry has come to a head with a proposal to levy a “tech tax” on the companies that have fueled the city’s transformation into a place that is increasingly uninhabitable for people on low or medium incomes.

Under the plan, large tech employers in the city, potentially including Google, Twitter, Uber, Airbnb and Salesforce, would be required to pay a 1.5% payroll tax. The estimated $120m in annual revenue would be used to fund affordable housing and services for the city’s large homeless population.

Local politicians are seeking to put the bill to a citywide vote in November, a move that would mark the culmination of years of boom that have rendered San Francisco one of the most unequal places in the US.

It is a city where 57.4% of homes are worth more than $1m, but hundreds of people sleep in tents on the street every night.

“The rapid tech boom in our city and region threatens our city’s ability to thrive and prosper,” said supervisor Eric Mar, who authored the bill. “Five years after the boom, it’s time for San Francisco to ask the tech companies to pay their fair share.”

Every week brings new outrages, whether it’s the tenant in North Beach who, it emerged this week, received a notice informing him that his rent was increasing from $1,800 a month to $8,000, or the kindergarten teacher whose building was bought by two tech workers and, it was revealed this month, is now facing eviction for nuisance violations that include “using appliances”.

The city is deeply divided politically between technological evangelists who believe passionately in an industry that has spurred the local economy and made the already rich even richer, and others who believe the sector’s recent encroachment into the city is responsible for erasing the city’s rich culture and sparking a housing crisis.

“They spend $25,000 per employee per year on perks like free beer and pool tables and massages,” said Feng Kung, an organizer with Jobs with Justice, a coalition of labor and community organizations that is backing the tech tax. “That’s great, but can they spend $1,000 to help the rest of San Francisco survive?”

The anger finds its outlet in different ways. Queer activist group Gay Shame regularly plasters telephone poles around town with posters featuring slogans such as “Brogrammers off the block” or drawings of the severed heads of tech CEOs on spikes. In the Mission, a Latino neighborhood being transformed by an influx of tech gentrifiers, including Facebook founder Mark Zuckerberg, graffiti recently appeared on the sidewalks declaring “Queers Hate Techies”.

Meanwhile, more than a few tech workers have gained viral notoriety for anti-homeless screeds, such as a February 2016 “open letter” that included the complaint: “I shouldn’t have to see the pain, struggle, and despair of homeless people to and from my way to work every day.”

There was a time when San Francisco would not have had the power to tax major tech companies, which have traditionally based their campuses in the suburbs of Silicon Valley, about forty miles to the south.

A seminal moment came in 2011, when homegrown Twitter threatened to decamp somewhere cheaper and more business friendly.

The city responded, first by offering a payroll tax break to companies like Twitter that located in its rundown Central Market neighborhood, and then by phasing out the payroll tax altogether and replacing it with a gross receipts tax – a popular change for tech companies that often have large workforces before they have any revenue.

The companies that took advantage of San Francisco’s tech-friendly incentives were, back then, just getting started. Today, that same stretch of the city, where Twitter put down roots, now hosts companies (Uber, Spotify, Dolby, Square, Zendesk, Yammer) whose valuations collectively approach $100bn. Silicon Valley natives like Google, LinkedIn, and even Apple are rapidly expanding into the city too.

The tech tax would partially turn back the clock, bringing back the 1.5% payroll tax, but only for tech companies.

“I was convinced that we needed to do something to keep Twitter and other companies in the city,” said Mar, who voted for the Twitter tax break in 2011, “but we should have built in more protections for the community. I think it was a big mistake.”

This week, the city’s tech, political, and media establishment have savaged the proposal for the tech tax.

Mayor Ed Lee, through a spokeswoman, called it a “job-killing” measure that would “return this city back to the days of the Great Recession”. The San Francisco Chronicle called the the tax “a dangerously dumb idea” that is “profoundly reckless and self-defeating”.

Supporters of the tax admit that its passage is a political long shot, requiring the support of six supervisors to place it on the ballot (they currently have just three), followed by a two-thirds majority of voters in November. But they argue that the city needs to at least have a debate about the role of the tech industry in the city’s many challenges.

That debate, if it comes, will likely only sharpen the divide between the two different San Franciscos.

There are few places that divide is more visible than the headquarters of Twitter – a 1937 art deco building in a neighborhood with a high concentration of low-income residents, many of the city’s nearly 7,000 homeless people, and single-room occupancy residential hotels that still advertise that their televisions are color.

A female Google employee stood on the sidewalk one afternoon this week, a block from Twitter HQ, distributing free hot dogs and watermelon to a cluster of homeless and poor people. The food was leftover from an event organized by HandsOn Bay Area, a group that coordinates volunteer activities for corporations.

“It’s nice to do something in your own community,” said the Googler, who asked not to be identified because the company frowns upon its employees speaking to the media.

Down the street, millennials were hunched over laptops in the Twitter HQ’s plaza. What once was an alley providing access to a wholesale furniture marketplace has been transformed into a pedestrian plaza with an astroturf lawn, reclaimed wood boardwalks, a gas-fueled fire pit, and a glass gate that can be locked at night.

Watching over it all was Robert Shields, a security guard who lives in a residential hotel and says he is worried about getting evicted. His job is pretty simple, he said, and mostly involves “keeping homeless people out”.

That’s not really a challenge, Shield said as he surveyed the landscaped expanse fronting shops offering $5 coffee and $9 hot dogs served on baguettes. “They know better.”