San Francisco’s New Tax Provisions May Have Unintended Consequences

“On November 3, 2020, San Francisco voters passed the following three significant tax measures:

• Proposition F, effective January 1, 2021, increases San Francisco’s gross receipts tax rate by 40 percent and eliminates the payroll tax, in response to historical and ongoing criticisms that the payroll tax system discourages hiring.
• Proposition L, effective January 1, 2022, imposes an additional gross receipts tax on companies that pay their top employees at least 100 times more than the median salary of their San Francisco employees, to decrease pay inequities.
• Proposition I, effective January 1, 2021, doubles San Francisco’s real estate transfer tax to 5.5 percent on transactions of $10 million or more and 6 percent on transactions of $25 million or more, in order raise additional revenue in the face of the COVID-19 pandemic.

A closer examination of these propositions raises questions about whether they will accomplish their stated objectives.”

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