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The Twitter Tax Break…Win Now, Lose Later?

April 5th, 2011 No comments

Earlier today, the San Francisco Board of Supervisors approved a six year payroll tax deferral for certain companies moving their headquarters into the city’s depressed Mid-Market area.  To qualify, a company must have a payroll exceeding $1 million.  The tax-friendly measure is set for final vote next week.

The Board’s action results from many of the city’s high tech companies threatening to take their operations elsewhere.  You may have heard of Twitter, Zynga, or Yelp.  All are located in San Francisco.  All are hit hard by the city’s 1.5 percent tax on employee compensation, including exercised stock options, of companies with payrolls exceeding $250,000.

Predictably, the Board seeks to keep these booming start ups within city limits:

Today’s vote is a vote to keep jobs in San Francisco. This policy is a crucial positive step in the ongoing effort to revitalize the Central Market and Tenderloin neighborhoods. Twitter’s commitment to move to this challenged stretch of Market Street and stay in San Francisco shows that we are not content to simply become a bedroom community for Silicon Valley. The companies that are born here should grow here.

Twitter led the debate at the Board’s weekly meeting, but the microblogging sensation has yet to comment on this measure.  Certainly, their in house and out house counsel are in the process of determining the next move.  As fellow tax blogger “taxgirl” suggests, perhaps these companies should have just continued to pay up given their estimated worth relative to the additional tax, considering the city’s fiscal troubles.  They may win the battle if the temporary tax break is implemented, but lose the war by facing a permanently damaged public perception.

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