PROPOSITION E | Libertarian Party of San Francisco


GROSS RECEIPTS TAX:  This amendment to the Business Tax Regulations Code creates a new business tax based on gross receipts, and replaces the current business payroll tax gradually over 5 years, beginning in 2014.  Businesses with gross receipts of less than $1 million annually will be exempt from the gross receipts tax.  Rates will vary depending on the type of business and its annual gross receipts.  NO.


Proponents argue that a payroll tax is a tax on hiring and reduces employment in San Francisco.  By the same logic, a gross receipts tax is a tax on selling goods or services, and reduces the economic activity from which wages are paid.

Who benefits from Proposition E:

The Gross Receipts Tax is expected to bring in an additional $28.5 million in tax revenues – the registration fees included in this proposal are higher than those mandated by the Payroll Tax ($75 to $35,000, instead of the current $25 to $500), and the taxes pyramid as they are applied to receipts from wholesalers to end sellers.  The increased tax revenue is needed if the Housing Trust (Proposition C) is to be adequately funded.  Therefore, those that benefit from Proposition C, will benefit from Proposition E.

Why is Proposition E not the best solution:

1.  Proposition E is 70 pages long, and describes an impossibly complex system of progressive taxes, registration fees, and penalties for non compliance.  It will not be very difficult for businesses to “game” such a convoluted system, or make honest mistakes costing them money in penalties.

2.  The complexity of this tax could render it vulnerable to a court challenge.  In 2001, the City had to give up its dual system of gross receipts/payroll in response to a successful court challenge.  Should the Housing Trust proposal be approved by voters, and should subsequently this tax be declared unconstitutional, projects under the Housing Trust programs will become inadequately funded.

3.  Businesses, big and small, need as much certainty as possible to plan and operate successfully.  This proposal is “fluid:” if the gross receipts tax revenue exceeds the revenue the City would have received under the payroll tax then the gross receipts will be kept.  If the gross receipts tax revenue never equals the revenue the City would have received under the payroll tax then the payroll tax will be reduced but not eliminated.  Difficult to plan under such uncertainty!

What do we suggest instead:

Libertarians, who believe a small and efficient government is the ideal, prefer simple sales or excise taxes that apply equally to everyone.  We consistently point out to voters that the more grandiose projects and benefits voters approve, the higher and more complex the costs imposed on everyone.  These costs come in the form of taxes, fees, and penalties, either paid directly or paid indirectly through costs passed on to consumers by those taxed directly.