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San Francisco Voters Choose Between a 1000 Percent Tax Increase and a 500 Percent Tax Increase

The city's "moderates" and "progressives" fight over whether to raise taxes or raise taxes.

Meinzahn/Dreamstime.comMeinzahn/Dreamstime.comSan Francisco voters head to the polls today for the city's municipal elections, where they will elect a new mayor and a council member, known as a supervisor. Also before voters is a pair of initiatives that offer the electorate a choice between sharply increasing taxes…and sharply increasing taxes.

Proposition D—better known as the Housing for All initiative—would boost the city's gross receipts tax on commercial rents from the current 0.3 percent to 1.7 percent (a 460 percent increase). The city controller estimates that the measure will rake in an extra $70 million in new revenue, which is earmarked for homelessness services and affordable housing.

The measure has attracted a number of prominent endorsements, including ones from the San Francisco Chronicle's editorial board and mayoral candidate and City Supervisor London Breed, as well as pro-development group SF YIMBY, all of whom say the new tax revenue is necessary to address the city's twin housing and homelessness crises.

But Prop D also has its opponents. Over half of the city's board of supervisors has come out against it, as has the local chapter of the Service Employees International Union. The San Francisco chapter of the Democratic Socialists also opposes it, dismissing the measure as "a crass attempt to break working class solidarity."

These critics have thrown their support behind Proposition C.

Like Prop D, Prop C would also boost the city's gross recipients tax, only it would raise it even higher, to 3.5 percent. That raise is anticipated to generate an additional $146 million a year, 85 percent of which would be earmarked for child care services. The other 15 percent would go into the general fund.

Also like Prop D, Prop C has the backing of its own mayoral candidate, City Supervisor Jane Kim.

Because Prop D was put on the ballot by the city's board of supervisors, it requires a supermajority to pass. Prop C, by contrast, was placed on the ballot by a signature gathering campaign, so it needs only a bare majority to pass. As both are trying to tap the same revenue source, only one can go into effect. Should both measures reach their requisite vote thresholds, the one with more affirmative votes will win.

In the local press, the dueling measures are being described as representative of the left-leaning city's political fault lines. The San Francisco Chronicle describes Prop D as having the backing of the "moderate wing" of the city's political class while Prop C is attracting the support of the "progressive bloc."

The San Francisco Weekly featured a similar analysis, quoting Jason McDaniel, a professor of political science at San Francisco State University, who said, "the dueling propositions reflect a combination of a) the polarization between the two major political factions in S.F., and b) close level of competition between them for control of government and policy."

Yet at the end of the day, both of these ostensibly polarized factions are supporting the same sort of high taxes to pay for the same sort of government activities. This "fight" between moderates and progressives looks a lot like Coke versus Pepsi.

That's a shame because both Prop C and Prop D are terrible ideas that deserve to fail.

Gross receipts taxes—which tax all incoming funds as opposed to taking profits—fell out fashion in tax policy circles long ago, given the seeming inefficiency and unfairness of imposing the same tax burden on all businesses regardless of their profitability.

"While buildings cannot leave San Francisco, tenants can. To the extent that this tax would be passed on to tenants, some business tenants might move to other cities, impacting the strength and diversity of San Francisco's economy," observed the San Francisco-area think tank SPUR in its June voter guide.

Office rents in San Francisco are the second highest in the nation, behind only New York. The office vacancy rate, at 9 percent, is also much lower than in the wider Silicon Valley (16 percent) and the nation as a whole (14 percent).

This suggests that demand for office space in the city is high and that any increase in taxes on commercial rent will be passed on to tenants, not eaten by landlords. San Francisco's thriving tech firms can probably survive such a rent hike. Lower margin businesses making just enough money to keep the lights on, however, will find themselves in a much tighter spot.

Both initiatives could fail today, but that seems unlikely. The only groups opposing both measures are the city's irrelevant Republican Party and the Building Owners and Managers Association of San Francisco (a trade group representing commercial landlords).

Diego Aguilar-Canabal of the Bay City Beacon predicts a loss for Prop D given its supermajority requirement and its failure to attract the support of the business community. That leaves Prop C as the likely winner. Should that analysis prove correct, San Franciscians would be stuck with the worst of two bad options.

Photo Credit: Meinzahn/Dreamstime.com

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  • BYODB||

    This is basically 'dog bites man' journalism, in that I don't think anyone in SF would ever vote for a tax decrease. For any reason.

  • a tandem||

    they have been conditioned because huge local tax increases were a huge net gain for them for decades. They were running the ultimate scam, using SALT deduction to make taxpayers in Texas, Arizona new Mexico, Nevada, Florida, and even Mississippi and Alabama pay for SF's and California's taxes.

    Went like this: Increase local federally deductible taxes by a billion, line the pockets of Dem politicians and contributors by say $200 million, spend $800 million on services, and have $500 million of the new taxes paid by citizens of other states due to the deductibility of the state/local income and property taxes.

    You probably have seen the claims that red states "pay more" or are "net contributors" to the federal budget. They are not: this scam was never counted in those calculations, in fact California has been a net taker.

    Even though trump stopped scam that allowed $100k Californian to pay less federal taxes than some $40k teacher in Florida, they Californians just can't get off their own addiction now. California already has profound structural problems with social program commitments and with pensions

  • TrickyVic (old school)||

    ""That's a shame because both Prop C and Prop D are terrible ideas that deserve to fail."'

    And what if they both pass?

  • gormadoc||

    "Should both measures reach their requisite vote thresholds, the one with more affirmative votes will win."

  • damikesc||

    I am HOPING for a tie and both pass. That shitty town deserves it.

  • Elias Fakaname||

    SF should be under martial law.

  • $park¥ leftist poser||

    As both are trying to tap the same revenue source, only one can go into effect. Should both measures reach their requisite vote thresholds, the one with more affirmative votes will win.

  • Empress Trudy||

    Add them together for 5.2%

  • Cynical Asshole||

    Sounds like San Fran got tired of Seattle stealing their proggie thunder recently with the "Amazon tax."

  • Don't look at me.||

    Couldn't happen to nicer people.

  • $park¥ leftist poser||

    Perhaps a compromise is in order. I suggest they raise the tax to 5.2 percent.

  • perlchpr||

    That really doesn't seem fair to homeless people. 10% should do it.

  • damikesc||

    5.2%? That is what "THE MAN" wants. They should do 15%. Show "the man" that they are too woke to accept his nonsense.

  • Citizen X||

    the Building Owners and Managers Association of San Francisco (a trade group representing commercial landlords)

    A group that is no doubt only slightly less ostracized than NAMBLA.

  • perlchpr||

    In San Francisco? I suspect they're rather more reviled than NAMBLA.

  • Mark22||

    And they're laughing all the way to the bank: the higher SF drives rents, the larger their profit, as long as people still foolishly move there.

  • Elias Fakaname||

    NAMBLA isn't reviled at all in SF. In fact, they were part of the mainstream gay rights movement as recently as 1982.

  • Bubba Jones||

    I have a contrarian opinion. SF rents are driven by an artificial political restriction, not by costs.

    To the extent that commercial real estate is owned by people who have benefited from the political policies, then rents are driven entirely by market demand, and not by costs. The taxes will be born by the people who benefited from the shitty policies. So, it's not unreasonable or illogical for SF to take a cut. 5% might not be too high.

    To the extent that the beneficiaries have all sold out to new investors at inflated prices, those new landlords will be screwed. They will be forced to try to reclaim the higher expenses from their tenants, or lose money. But, they chose to invest in real estate whose value was largely determined by politics.

    TLDR: These taxes are part and parcel of investing in the SF city council.

  • BestUsedCarSales||

    Is that even contrarian?

  • Bubba Jones||

    Contrarian to the extent that I don't disagree with the taxes. It's a way for "the people" to cash in on the value they artificially created. And I don't think they will necessarily raise rents. And I don't sympathize with the investors.

  • Don't look at me.||

    Said the guy with no money.

  • ||

    It's a way for "the people" to cash in on the value they artificially created.

    Joseph Stiglitz approves this message.

  • damikesc||

    And I don't think they will necessarily raise rents.

    That's awfully optimistic.

    I bet they will raise rents to more than cover it.

    And SF's descent into shithole status will not be slowed.

  • Agammamon||

    That's not contrarian, that's what the article says.

    It just says that the current set of businesses wanting to be in SF is high enough that they're eating those costs anyway - which is why the SF vacancy rate is lower than the country in general. So, to an extent, SF has to be doing *something* right. Even if they're doing a lot of stuff wrong.

  • a tandem||

    "artificial political restriction"

    here is how it works. organize to have huge swaths of land between SF and Sacramento declared wetlands, depress value of land, have major California Democrat developers give money to politicians, have those developers buy the land cheaply, have the wetlands restrictions lifted, have the developers make a windfall, rinse and repeat.

    That for sure generated billions and billions in profits, and I am sure there are more ways than ever to do it in increasingly regulated SF itself. More regulations equal more opportunity for systematic poltical graft.

  • Diane Reynolds (Paul.)||

    Homelessness has been the most lucrative thing to come along for left coast blue cities since... like ever.

  • Shirley Knott||

    Why else do you suppose it was made to happen?

  • mpercy||

    When you subsidize something, you get more of it. The "homeless problem" in SF and other left-coast cities may have initially been created by a climate that is friendly to living on the street. But the feedback loop of constantly trying to make it better for the homeless is certainly doing nothing more than attracting more homeless and incentivizing the current homeless population to remain there.

  • 10mm||

    I was just thinking I need to get into the 'affordable housing' and 'shelter' games. Apparently there's an endless slush fund being drummed up.

  • damikesc||

    It's odd, though, because homelessness only occurs because of Republicans. News coverage shows that.

    But hyper-Democrat cities have so many homeless.

    I bet the Kochs are to blame. Or the NRA.

  • perlchpr||

    As both are trying to tap the same revenue source, only one can go into effect.

    Well. Thank God for certain small favors, then. As soon as I read the first 'graf, my immediate thought was, "Who says the voters will pick one or the other, and not simply both?"

  • I'm Not Sure||

    As soon as I read the first 'graf, my immediate thought was, "Who says the voters will pick one or the other, and not simply both?"

    And then be surprised when they find out how they'll be expected to pay for it.

    "Of course, I want people to have health care," Vinson said. "I just didn't realize I would be the one who was going to pay for it personally."

    https://www.mercurynews.com/2013/10/05/
    obamacares-winners-and-losers-in-bay-area/

  • Bubba Jones||

  • I'm Not Sure||

    How do you do that?

  • Bubba Jones||

    MAGIC

    or, remove the s in https.

  • Bubba Jones||

    it still redirects to https.

  • I'm Not Sure||

    Thanks, I can probably do that. Good thing it's not magic.

  • Enjoy Every Sandwich||

    The March to the Socialist Worker's Utopia continues!

  • NotAnotherSkippy||

    Si se puede.

  • Sometimes a Great Notion||

    This "fight" between moderates and progressives looks a lot like Coke versus Pepsi.

    More like a choice between a shit sandwich or a turd burger. And Coke is superior to Pepsi.

  • Quo Usque Tandem||

    "Choice between a shit sandwich and a turd burger." Rather like a recent national election. And I have to agree the one we got is slightly better tasting shit than the one we didn't.

  • Don't look at me.||

    You guys don't know shit. Dr Pepper is the only thing worth drinking.

  • BYODB||

    Poor Canadians don't know what they're missing.

  • Juice||

    It's all HFCS, but at least Coke has come sort of addictive coca extract in it (for pep!).

  • mpercy||

    The giant douche wants to know why you dissed him?

  • albo||

    That's a shame because both Prop C and Prop D are terrible ideas that deserve to fail

    Well, that means they're both right in the city's wheelhouse.

  • TGoodchild||

    Point and laugh.

  • Juice||

    WTF is so awesome about having an office and/or home in San Francisco? What makes the demand so high? Most office type things can be done remotely these days and there's little to no need for an office downtown anymore.

  • Jerryskids||

    Same reason people wear Rolexes less reliable than a Timex and carry Hermes bags less practical than a pillowcase. Conspicuous consumption. How are you going to let people know how superior you are to them if you don't make an ostentatious display of your superiority? Which is the real reason they're so hostile to development - how exclusive can this place be if they keep letting more people in?

  • Mark22||

    WTF is so awesome about having an office and/or home in San Francisco?

    Sex and drugs. It appeals to 20-somethings, and it appeals to people who want to employ 20-somethings and who want to have sex with 20-somethings.

    It used to be gay sex, but these days, it seems to be mostly straight sex.

  • higgyb||

    san franfreaky, a joke within a joke wrapped in farce.

  • Elias Fakaname||

    Yet Seattle is jealous they're doing this.

  • Agammamon||

    As both are trying to tap the same revenue source, only one can go into effect. Should both measures reach their requisite vote thresholds, the one with more affirmative votes will win.

    Oh no, no, no. This is CA, I'm willing to bet that if both passed you'd see a 1000% increase and then another 500% increase *on top of that* to maximize the amount of 'revenue' the city will bring in.

    Of course, reality will set in and, no matter which one wins, neither will bring in anywhere near as much revenue as projected. But hey, the Laffer Curve isn't a real thing, is it Tony?

  • Hunthjof||

    You missed the part where they will blame greedy businesses and landlords for not bringing in the expected revenue and therefore need another tax to get those meanies and the goobernugget voters will gladly impose it. watchinbg California governments is like watching a Road Runner Cartoon. They will get it right this time by golly.

  • Agammamon||

    Lower margin businesses making just enough money to keep the lights on, however, will find themselves in a much tighter spot.

    Look, if these businesses can't afford to support the homeless in the condition to which they've become accustomed then they need to make way for more profitable businesses.

    It will be like France - sure, the long-term unemployment rate is 20%, but the people who *are* working are some of the most efficient and productive in the West.

  • I am the 0.000000013%||

    It will be like France - sure, the long-term unemployment rate is 20%, but the people who *are* working are some of the most efficient and productive in the West.

    That is a really interesting statement, and I could see that it might work at least as long as whatever was allowing that level of productivity isn't adopted elsewhere. You could very well be right. Excellent.

    Alternatively I could see modern day San Francisco as surviving on the wealth created in the .com gold rush based on the introduction of a completely new class of product. If that's the case, and that wealth is being squandered, San Francisco is in for a very hard fall.

  • damikesc||

    SF makes me long for a tax on internet goods.

    Just to fuck with them.

  • Butler T. Reynolds||

    The worst part about this is that it will be the breaking point for some of them. They'll move to my city, enjoy a nicer house and lifestyle than they had before, then advocate for the same nonsense here.

  • I'm Not Sure||

    As an ex-Californian who moved to another city, enjoying a nicer house and lifestyle than I had before and who did not (and does not) advocate for the same nonsense here, it pains me to say you're more right than not.

  • damikesc||

    Instapundit's idea of a welcome wagon for such people is needed. A little package to welcome them, remind them why they left, and a suggestion that the policies voted for in that city should probably be avoided.

    ...or simply forbid voting on local issues until you have residency for 3 years,

  • Able_Magwitch||

    Is this a direct result of Republican changes to the tax law (i.e. the cap on deductions?) If so, I (sort of) love it (despite the fact that it makes me feel like violently retching).

    How long before we see a tax revolt on the magnitude of Prop 13 (not seen since 1978)?

  • MarkLastname||

    Actually, if San Francisco's leaders were sane, the Republican tax bill would incentivize them to lower taxes.

  • Happy Chandler||

    More likely a revolt against prop 13, especial as related to commercial property, not affected by the tax bill.

  • Empress Trudy||

    The challenge in SF isn't raising taxes it's raising them to the point that people would vote them down. 10%? 50%? 300%?

  • No Yards Penalty||

    Wife was pretty excited to be going to SF a few months ago for a conference.
    After dodging homeless losers so thick she could barely see the sidewalk, let's just say she's spent every day since telling people what a shit-hole SF is.

  • Happy Chandler||

    Man, it must piss you off. San Francisco pretty much disproves every theory you have. Those crazy leftists are so inhospitable to liberals that, let me check, oh yeah, demand for office space is high. Taxes on the rich are high, but they keep moving there.

    Companies move there because that's where the best workers are. Liberal policies attract smart people. Also, agglomeration. Stanford and Berkeley ensure a steady stream of high quality graduates, and educated people move here.

    The two biggest problems are the geography, with the city surrounded on three sides by water and the seven hills, and the nimby folks that block development. High tax and high service supports business.

  • Mark22||

    Man, it must piss you off. San Francisco pretty much disproves every theory you have.

    You mean the fact that it is a literal shithole with massive income inequality and massive homelessnes that attracts as many plutocrats as Tokyo, a city 15 times its size? Seems like SF is illustrating what's wrong with leftist policies just fine.

    Those crazy leftists are so inhospitable to liberals that, let me check, oh yeah, demand for office space is high. Taxes on the rich are high, but they keep moving there.

    The wealthy don't care about taxes since we don't tax wealth, we tax income and property. And if you're a leftist with a net worth of $100 million, trivial matters like SF real estate taxes don't matter to you, in particular if you married into your money or won it in the startup lottery.

    People who actually pay taxes are getting fed up with California and leaving.

  • Happy Chandler||

    I thought the wealthy would leave if taxes were high?
    Why are there so many businesses based in San Francisco? For many businesses, it's the best place to be, despite what the libertarians try to tell you. I never said that there weren't problems, but the taxes aren't one of them. The vacancy rate is low. Why shouldn't there be more taxes on coaxial rents? The demand will still be there.

  • damikesc||

    ITT, Happy Chandler argues that the plot of Elysium is actually a GOOD idea.

  • a tandem||

    happy is wrong. *Effective* taxes on the rich and corporations are not high in SF, taxes on the middle class and working poor are. Wealthy individuals have ways to get around new SALT restrictions and corporations are able to deduct them, meaning taxpayers in Texas and Florida are subsidizing SF's taxes. why do you think this tax is on commercial real estate and not inmcome or residential property ? Because upper class professionals in SF are now limited in their SALT deduction (ie forcing people in other sttes to subsidize them) and this new tax is also subsidized by the rest of the country.

  • Mark22||

    I thought the wealthy would leave if taxes were high?

    That's because you are confusing "the wealthy" with "high income earners".

    Why are there so many businesses based in San Francisco?

    Are there? Relative to what? What's the opportunity cost?

  • Happy Chandler||

    http://fortune.com/2017/08/10/.....the-world/
    Two of the top four most high tech cities in the world are in California. None of the top ten are in low tax areas.

  • a tandem||

    That article lists corporate fronts, companies that reduced amount of operation in high tax areas but maintain essentially a mailing address. Like major K St address DC firms that have 90% of their employees in much lower tax Virginia, or "Madison avenue" firms with most of their talent and workers elsewhere

  • Mark22||

    Two of the top four most high tech cities in the world are in California. None of the top ten are in low tax areas.

    So? Rich young techies like to congregate in expensive cities. What's your point?

  • Mark22||

    Should both measures reach their requisite vote thresholds, the one with more affirmative votes will win.

    What a shame! I was hoping SF could enact both! It speeds up the inevitable.

  • Devastator||

    Two choices "we're going to rape you or if you prefer rape you twice as much --Love, City Council"

  • 10mm||

    Why the slow crawl? Why doesn't the bay area just ramp every tax/fee/regulation up to Nordic country levels asap and get it over.

    I want to see a high speed crash, not a slow tumble.

  • I am the 0.000000013%||

    It would be nice to have a map based utility where you could draw a perimeter around and area and specify a time period and get an abstracted list of the net flows of resources in and out of the area. It's impossible, and easily gameable, but it would be really interesting to see why unsustainable practices seem to work.

    My guess is that San Francisco can get away with things like this because they have a net inflow of state and federal dollars.

    Other areas (Alaska comes to mind) might be trading off vast natural resources for a temporarily higher standard of living than they could otherwise afford.

  • Happy Chandler||

    San Francisco, due to the number of wealthy people, high property values, and strong business climate produces great tax revenues. Overall, California pays more in taxes and receives less in benefits. Alaska gets the third most in federal benefit after Virginia and Maryland (who are tops because federal offices such as the Pentagon and the NIH).
    Source

  • ignorance=bliss||

    So what your really saying is that there is a city full of rich "liberals", with vastly superior minds and compassion who need to be forced through taxes to help the poor? Homeless is just another money racket to pad the pockets of developers (my opinion). If it was truly about compassion the wealthy compassionate liberals would fix it right? I thought progressives were the embodiment of enlightenment and all that is good. Or is it the reality of actually being self absorbed douche bags that rather have government do it and fuck how everyone else feels about it. May I ask how many years SF has been dumping tax dollars on the homeless problem and with all that money being dumped in that uber liberal/progressive city has the homeless problem decreased in number or increased?

  • a tandem||

    your source does not count federal deductions from high taws, California is a net taker

  • Mark22||

    Overall, California pays more in taxes and receives less in benefits.

    Even taken at face value, California is experiencing another bubble; this needs to be balanced by the periods of economic misery.

    But I have never seen a source that makes that case convincingly; among other things, a lot of money that ends up subsidizing California is nominally paid to other states.

  • a tandem||

    Sand Francisco has a huge net inflo of federal and state dollars due to the deductions on the high taxes, all paid for by people elsewhere and never counted in the claims hat SF or Cali are net contributors to the federal budget -- they are not .

    Essentially the strategy SF has adopted is to push out ALL working poor and middle class. they have among the highest rate of employment of illegals, and the lowest pay after cost of living of illegals.

    Illegals who do live there pay local property tax on pass through, local sales and use taxes -- but ZERO federal income taxes to pay for the massive use of food stamps and federal benefits
    http://cis.org/Report/Aid-Prog.....ble-Aliens

    Essentially San Francisco is a country club where locals look around, see young happy helathy people and say "everything is fantastic" while they :

    - EXPORT their high burden retirees to lower tax states (and then absurdly claim those retirees; federal benefits means the lower tax states are net takers)
    - Export working poor
    - import lower local cost, high federal cost illegals to work at depressed wages
    -Erect tax schemes that allow massive federal deductions.

  • Nonstopdrivel||

    San Franciscians would be stuck with the worst of two bad options.

    The worse of two bad options, you mean. You can't have a superlative with a binary set of options. (Sorry, my pedant hat is firmly sutured into my scalp.)

  • Mac91302||

    Most commercial leases have an operating expense pass through whereby any increase in operating costs, includng taxes, is passed through to the tenants. Most if not of all the increased tax will be paid by San Francisco businesses who will then be incentivized to move outside the city limits when their lease is up for renewal.

  • Happy Chandler||

    People keep saying that businesses are going to leave San Francisco. But, the economy is strong. How many times can you be wrong?

  • Migrant Log Chipper||

    Hey, new douchebag dead thread-fucker...are you a Tony or Hihn sock?

  • a tandem||

    Business are employing less there. Most growing high tech has effectively left, maintaining a HQ front in SF and not paying much local taxes since they have moved the bulk to lower tax areas

  • damikesc||

    Ha ha ha. Fuck San Francisco. Elitist douchebags deserve to get raped by their government.

  • libertynugget||

    I'm really starting the thing Trey Parker and Matt Stone are the Nostradamus of our time...

    "California, is nice to the homeless, Califonia..nya..nya super cool to the homeless"

    No idea why these places hold so much industry.

  • Killer Hawk||

    SF is another hell hole big city in CA. Nowadays is being piled with human feces, dope syringes, and piles of garbage due to high homelessness. This hell wasn't there before. Walking in SF is a death wish, accidental step ping on dope syringe on the sidewalk.

  • Rockabilly||

    C or D: who has the best communism?

  • a tandem||

    It an end run around new "SALT (state and local tax deductibility in federal taxes) laws. The new federal tax laws were designed to decrease how much high tax jurisdictions like SF and other high tax California cities can put their tax loads on lower tax jurisdictions. this is a way around it.

    Essentially Sf is a tax scam, haven like Switzerland, Cyprus used to be and some Caribbean islands are. the wealthy pay the lowest *effective* taxes and California itself is a net taker, making taxpayers in Texas, Florida and Alaska pay Californians taxes due to the subsidy from deductions.

    Californians have the gall to claim they are net contributors to the federal budget by not counting the federal deductions, when they are in fact like heroin addictions deeply dependent on putting their tax burden on people in other states.

    Other states are now even paying for Californians massive public sector pension mess

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