For decades, San Francisco’s Silicon Valley has been a technology incubator. High-tech titans such as Apple, Facebook, Google, Hewlett-Packard, Netflix and many more have all been born in this beehive of entrepreneurship and innovation. However, despite the numerous benefits they’ve received from successful businesses, San Franciscans seem intent on taxing to death the golden geese that have made the Golden Gate City a modern mecca for technology.
In November, almost 60 percent of San Francisco voters approved Proposition C, which will increase taxes on local businesses so that the city can spend more money to combat homelessness. The new taxes are so destructive that these voters have effectively decided to commit economic suicide.
Proposition C will incur an average tax of 0.5 percent on all gross receipts for businesses with annual revenue exceeding $50 million. The new tax, which will be the largest in San Francisco’s history, is expected to generate approximately $300 million annually. According to proponents of the tax, the new revenue will be used for homeless shelters and mental health services.
On the other hand, opponents of the tax — which include San Francisco Mayor London Breed, the Chamber of Commerce, and several CEOs — say the new tax is unnecessary and will cause more businesses to flee the Golden State.
“I do not believe doubling what we spend on homelessness without new accountability, when we don’t even spend what we have now efficiently, is good government,” Breed said in a statement.
According to the city’s Homelessness Gross Receipts Tax Economic Impact Report, “The primary negative impact is the increased tax burden on the affected businesses, which creates an incentive to move jobs out of San Francisco in the future.” Even worse, the report states that Proposition C will produce “a net average annual loss of 725- 875 jobs, over a twenty-year forecast period, and a city GDP loss of $200-240 million per year, in 2017 dollars.”
San Francisco has one of the highest homeless populations in the United States. In 2017, Ed Lee, San Francisco’s former mayor, created the Department of Homelessness and Supportive Housing to provide services for a homeless population of more than 7,400. In fiscal year 2017, San Francisco spent a whopping $275 million on homelessness.
To combat this serious problem, a vast majority of San Franciscans — most of whom naively believe spending more money on government programs can solve all social problems — voted to penalize businesses so the city can double the amount of money it devotes to homelessness. While helping homeless people is certainly a noble goal, San Francisco’s government has repeatedly proven it’s completely incapable of designing a program that properly addresses the city’s growing homelessness crisis.
Over the past decade, San Francisco substantially increased its spending on new shelters and support services for its enormous homeless population, and the results have been dismal. In recent years, despite hundreds of millions of taxpayer dollars, the city has barely made a dent in its battle against homelessness. According to official city data, San Francisco’s homeless population has increased every year since 2005. Even more problematic, the city’s “unsheltered population” has risen from 2,709 to 4,353 from 2008 to 2017.
Unfortunately, having thousands of homeless people living in tents across the city has led to many other problems. According to the San Francisco Chronicle, public-works crews have collected more than 679 tons of trash and 100,000 used syringes from homeless tent camps since June 2016. Also in 2016, San Francisco residents lodged 22,608 complaints about needles and human feces in homeless encampments.
Obviously, homelessness is a problem that needs to be addressed, but the San Francisco approach of throwing more money at the problem has only made things worse.
It’s strange voters in San Francisco would elect to tax successful businesses given what recently occurred in nearby Seattle, another high-tech enclave on the West Coast with a long history of progressive political policies. For years, the Emerald City has provided generous services and accommodations to its homeless population. As a result, the city’s homeless population without shelter has skyrocketed from 2,759 in 2010 to 6,320 in 2018.
In 2018, the Seattle City Council decided it needed more money to deal with the homelessness crisis, so it approved a $275-per-employee tax on all Seattle companies with at least $20 million in gross annual revenue. Immediately, the business community made it clear that this would produce negative economic effects that would ripple throughout Seattle’s economy. Some business leaders even threatened to move some of their business operations elsewhere. In the wake of the backlash, the Seattle City Council voted to repeal its tax, a truly remarkable (and embarrassing) turn of events.
Hopefully, San Francisco residents will wise up and realize that Proposition C will do far more harm than good. Driving out businesses, eliminating jobs and reducing the city’s GDP by hundreds of millions per year are nothing but a recipe for economic disaster.
Unless San Francisco follows Seattle’s example, the Golden Gate City’s problems will get significantly worse. You can’t expect to fix homelessness by driving businesses out of town.
Chris Talgo is an editor at The Heartland Institute.
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