Independent Contractor Compliance Blog

San Francisco Mayor Gavin Newsom, who unveiled the plan Wednesday at a breakfast event with several hundred local business people, says he wants to get the city’s economy going again and that the city can not rely on the federal government to help.

The proposal is in response to the city’s failing economic condition.  It is estimated that San Francisco’s general fund will fall short of expenses in the current year by as much as $127 million. In addition, the city’s unemployment rate is currently around 6.6 percent, higher than it has been in years.

The proposal has several elements

Payroll Tax Credit: Possibly one of the most important elements to this proposal is a payroll tax exclusion for San Francisco businesses that add jobs within the city limits over the next two years. These businesses will not have to pay the city’s 1.5 percent payroll tax (which is charged above and beyond all state and federal payroll taxes) on only those new positions. The 1.5% payroll tax has been criticized in the past because it discourages businesses from hiring San Francisco workers.

(Historical Note:  Taxes were originally created to fund the operation of the government (regardless of form). However over time, the manipulation of tax rates, tax rebates, tax credits and tax exclusions became tools for governments to encourage, discourage, regulate and control the civil population and business activities).

Business Loans: Another element of the proposal would be for the city to make loans available to small companies that might not qualify for a conventional commercial bank loan. Under the proposal, the city will make loans in the range of $5,000 and $50,000 to small businesses. The city may also make larger no-interest loans to businesses, Newsom said during his breakfast talk.

Property Tax Rebate: The proposal also includes a 50 percent rebate of the property tax that businesses pay for unsecured property. Typically items such as new office furniture, machinery and equipment would qualify for this rebate. The rebate would only apply to the property purchased within San Francisco in the future.

Newsom said the stimulus package “is totally paid for.”

To pay for the loan program, city officials intend to use dollars the city already receives from the U.S. Housing and Urban Development Department.

Mayor Newsom believes this proposal would economically heal San Francisco and intends to introduce the stimulus plan to the supervisors next week. If all goes well, the package may be put up for a vote as soon as March.

Let’s keep an eye on the details as they develop.