c. Revenue and Expenditure Reform

In the weeks following the election of President Obama, Chris Cook and Eric Quezada wrote the following in an op ed in the Bay Guardian: In this year of “change,” we need a fundamental shift in our city’s taxing and spending priorities — a bold New Deal for San Francisco that enlarges the public pie that everyone’s scuffling over, and that creates green jobs and new housing opportunities targeting poor neighborhoods and districts. It’s time to get serious about taxing and redistributing wealth to stimulate new economic opportunities… We need to tax wealth in new ways that replenish the local economy, creating green living-wage jobs with health care and opportunities for small businesses and community-serving groups… Now is the time to prioritize production, public infrastructure, education, and cooperation for the common good; our economy needs a stimulus based on solidarity and collective good. We’re being presented with false scarcity and false choices — do we cut housing or health care to meet the budget? Few are asking the key question: why don’t we have more money to work with, in this vastly wealthy region?

In an earlier New Deal, President Franklin D. Roosevelt imposed a 90 percent tax on upper income brackets — making it virtually illegal for people to earn so much more than others. Locally, city leaders should explore a gross receipts tax on large firms; new taxes on luxury and high-priced items, such as SUVs, second homes, yachts, and other extravagances; perhaps revive the push for a downtown business tax levied on large firms in the financial district; and a truly progressive income tax harnessing revenues from high-income folks.[i]

As we write this, leaders from community-based nonprofits, grassroots organizing and neighborhood groups, and labor unions, are meeting to discuss revenue measures for the November ballot. Much of what follows is culled from the discussion being held by the Revenue for All campaign of the Budget Justice coalition. This section will outline a set of combined revenue enhancement measures – progressive taxation – and arguments showing how the City can contain costs and expenditures while increasing the capacity to expand and provide enhanced local services.

1. Develop a progressive revenue strategy to ensure long-term sustainability of the City’s physical and social infrastructure.

In the context of the City’s ongoing budget crisis, various groupings of community (nonprofit agencies & grassroots organizing groups) and labor organizations are working on revenue measures for the November 2007 ballot, including Budget Justice, a coalition of groups across SF who are fighting for greater equity in revenue and budget issues, and social-economic justice. Beyond the immediate needs, however, the city needs to map out a long-term strategy for sustainable revenue generation, to address local budget crises & help create an economic recovery for San Francisco’s working people. The eye is towards a long-term commitment to put progressive measures on ballot until they win, not just one-shot campaigns. We are calling for a progressive taxation movement, and a real challenge to the defeatist politics of austerity that’s so prevalent today. Revenue for All!

The list below includes some of the progressive revenue that have been raised, and which should be further explored as part of this long-term strategy. Regressive revenue measures, those which affect the poor and working class the hardest, such as sales taxes or (arguably) vehicle license fees, are not included in this list.

  1. Gross Receipts Tax. This may be a hybrid model: gross receipts for certain sectors (replacing the payroll tax), and a graduated payroll tax for particular industries. Extend to sole proprietorships (over certain amount), and include gross receipts on commercial rental income. We believe this should result in a net increase in revenues, not a “revenue neutral” change. Requires 50% + 1 votes to pass measure.
  2. Hotel Tax Increase. Increase by 2%. Estimated to raise $11.82 million. SF and Oakland are both at 14% currently, THE proposal is to raise ours to 16%. With a public vote, could be dedicated to the arts, and affordable housing for seniors and people with disabilities. See section below on Cultural Economy for further discussion on Hotel Tax. Requires 50% + 1 votes to pass measure.
  3. Parcel Tax. Could be tiered based on type of parcel. Estimated to raise $62 million. Can be dedicated for multiple uses (Prop H, jobs, etc.). Requires 55% votes for for SFUSD, 2/3rds for anything else (including schools and city uses).
  4. Utility Users Tax. Raise the rate for commercial properties; extend tax to telecommunications for residential properties. Requires 50% + 1 votes to pass measure.
  5. Property Transfer Tax. At existing 1.5% rate, the proposal is to lower the threshold from $5 million properties to $1 million. Estimated to raise $24 million. Requires 50% + 1 votes to pass measure. May not be possible to dedicate funds due to Prop 13.
  6. Second Home Tax. Would apply to timeshares and corporate housing. Estimated to raise $10 million.
  7. Luxury Tax. This would be an extension of the sales tax for luxury and high-priced items, such as SUVs, yachts, etc.
  8. Valet Parking Tax. Estimated to raise $2-5 million.

2.   Implement a Local Carbon Tax / Carbon Off-Set Mechanism.

A revenue source is key to many of the programs we wish to institute. Our discussions about supporting local businesses, green jobs, etc., indicate that economic development strategies are a key part of how San Francisco will meet the challenges of climate change and reductions in emissions. Instituting some kind of local carbon tax will support economic development programs that will offset locally the emissions produced by development projects. For example, if a new Whole Foods produces 600 tons of CO2, then they must offset those emissions locally. Development projects subject to Planning Department approval which exceed a certain number of vehicle trips a day shall be required, as a condition of their approval, to either pay a new local Carbon Tax, dedicated to the City’s sustainability projects, or to off-set their carbon emissions by investment in sustainable agricultural, habitat and open space restoration, or recycling of disposable containers and building materials.

3.   Establish an enforceable mechanism so that budget cuts always prioritize savings in upper management salaries and preserve frontline services.

Cost savings can be achieved at upper management salaries, and the primary goal has to be preserving frontline services. We need to look at cost-saving measures, limiting admin costs at middle-management and limiting overtime and admin overhead expenditures to police and fire in future collective bargaining settlements. For example, see the Budget Analysts reports on Fire Department expenses in administration.

4.   Work to address revenue problems at the State level.

Much of the City’s revenue problem lies not just locally, but at State and Federal levels. A priority for the city should be restructuring Prop 13 toward a split-roll system.


[i] San Francisco Bay Guardian, November 25, 2008. http://www.sfbg.com/printable_entry.php?entry_id=7569

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