> This is just....staggeringly stupid. It just penalizes low margin businesses, for no reason. How can anyone possibly think this is a good idea?
You might want to ask sf.citi, the SF tech industry lobbying group who came up with it in 2012. Here's a video of Jack Dorsey campaigning for the gross receipts tax as CEO of Square.[1]
The argument then, of course, was that we shouldn't tax early stage pre-revenue tech companies based on their payroll because it increases their burn rate. Better to wait until they generate revenue and tax that. Help support the growth of new companies so they can bring in more tax revenue in the long run. Or so the argument went.
Now that they're making money and it's time to pay up, of course, they've changed their tune. Suddenly they've discovered that the system they lobbied for and got is "unfair" and they still shouldn't pay taxes.
I mean, taxing payroll is just as stupid. You tax net income, because it's normalized across businesses. Taxing payroll or revenue is just economic nonsense.
Most businesses aim for net income. Most startups don't even try, even if they've raised hundreds of millions of dollars and occupy fancy offices. (It's also very easy for IP-based businesses to shift where income is generated.)
And that's the basic reasoning behind SF's gross proceeds tax. It's a uniquely SV tax that only works because so many unicorns built their house of cards out of claiming revenue for things no other business would claim as revenue.
Yes, it would be great if we could have some kind of Generally Accepted Accounting Practices that would specify what counts as net income and what doesn't.
> Net income isn't normalized across businesses.
> Most businesses aim for net income. Most startups don't even try, even if they've raised hundreds of millions of dollars and occupy fancy offices. (It's also very easy for IP-based businesses to shift where income is generated.)
Why would you want to tax a startup that isn't making any money? The whole point of government taxation is to generate revenue from profitable business activity occurring there. Taxing businesses that aren't even making money is ridiculous.
And sure, you can shift where profits are generated. But you can also just not be in SF. Which is exactly what's happening.
Sure, a net income tax doesn't tax the VC fueled companied sending people $2 for $1. But it would tax the owners of the fancy office they're renting for an absurd amount. And it would tax the catering service that's coming in 3x a day. And it may tax the office supply firm that's selling them the fancy chairs (maybe, not sure if office supply warehouses are in SF or on the peninsula).
I haven't researched this issue much, but I think it's fair to expect that the CEO of Square could have anticipated this becoming an issue if Square succeeded.
abalone's comment that "they've changed their tune. ... and they still shouldn't pay taxes" could simply be hyperbolic, depending on how charitable people are in their interpretation (e.g. "shouldn't pay [the full amount of] taxes").
I think the main thrust of abalone's comment stands: the CEO of Square pushed for a tax that many think is absurd (e.g. darawk), and now that Square has grown and the tax is unfavorable for them, Square wants to change the tax that it seems to have lobbied for (and presumably thought was fair back then) -- that makes Square seem opportunistic [and not having the community's best interest in mind when the CEO lobbied for the tax]. At least, I think that is abalone's implication.
I don't really see any problem with how Jack behaved.
Jack wanted companies to pay more tax to the city. He helped lobby it.
But this part where Saleforce pays less tax than Square is absurd. So, he's against it.
I don't really see any problem with this line of thinking.
To give the exact number, Square pays 20m, and Saleforce pays 10m. But Saleforce is 2-10x bigger than Square. No matter how you cut it. It's not fair.
I want people to pay more income tax as well (to fund other initiatives). But would I want to pay tax MORE than anybody else? Probably not. Does that make me a hypocrite? Hell no.
It just feels like people are being obtuse at this point :S
> Jack wanted companies to pay more tax to the city.
Uh, no. Jack has specifically and consistently lobbied against paying taxes (see: previous link). In 2011 he threatened to threatened to move Twitter to neighboring Brisbane unless he got the now infamous mid market tax break.[1] Exactly what Stripe just did. He greatly exaggerates the impact of a hypothetical $10M extra towards fighting homelessness on a $26B company with $3B in revenues.
The best response to this “fairness” line was from Marc Benioff himself, who said to Jack, ok, tell us how much you or Square or Twitter has given towards addressing homelessness in any other form. Crickets from Jack. He really doesn’t like paying taxes or giving.
Yet you still doesn't give a straight answer how it is fair that Saleforce pays less tax than Square. I don't blame you. Nobody has answered that question.
Even Benioff merely said ~$10m was nothing to Square. He implied it didn't matter that it wasn't fair because the amount was so little. Like Wut?
Because Square doesn't help homeless much (I don't really know how much compared to Saleforce and other companies), so we make a law for a smaller company to pay tax more than a bigger company? We can simply disregard fairness? Really?
Also, Jack explicitly said that he has no problem paying taxes to the city; he wants to pay tax fairly when considering peer companies. We just gonna need to agree to disagree on whether jack is willing to pay tax.
>> It just feels like people are being obtuse at this point :S
Maybe -- just maybe -- people understand your point but are bringing up something else that they think is relevant.
> Yet you still doesn't give a straight answer how it is fair that Saleforce pays less tax than Square. I don't blame you. Nobody has answered that question.
I don't think people are saying that the tax situation is fair. Rather, I believe the claim is that Square's CEO is likely not exclusively focused on the unfairness of the situation when he is complaining about the tax situation, but complains about tax in general. I think abalone wouldn't be giving Jack grief (or at least much less), if Jack did not lobby for that tax earlier.
To spell this out further with an extreme example, imagine a recent college grad who's super smart and has the attention of the world. He says "It's crazy that recent college grads are saddled with student loans. Instead, we should soak the rich and heavily tax everyone making $1 million or more." People agree, and the tax is instituted. A few years pass, and after his college debt is forgiven, this recent college grad is doing really well and finds himself making $2 million a year. At this point, he says "It's crazy that higher income workers pay such a high percentage of their income relative to others -- everyone should pay the same percentage." To which people respond "but then we can't forgive student debt with the reduced tax revenue," and yet the recent college grad persists. Do you see the problem with the behavior of the recent college grad?
It might be that the grad sincerely held his conflicting positions when he proclaimed them, but it's also possible that he was always advocating for what was advantageous to himself. Given the short time period (and that the grad makes no offer of accepting his college debt back), people generally guess that he using a sense of fairness to advance his own interests.
Again, I'm not very familiar with the situation, but it seems that the current tax is not a good one, and the CEO of a payments company could have foreseen that it would not be good for his company once his sales got rolling. Why didn't Jack advocate for some other tax scheme earlier, such as one that is based on net income?
You might want to ask sf.citi, the SF tech industry lobbying group who came up with it in 2012. Here's a video of Jack Dorsey campaigning for the gross receipts tax as CEO of Square.[1]
The argument then, of course, was that we shouldn't tax early stage pre-revenue tech companies based on their payroll because it increases their burn rate. Better to wait until they generate revenue and tax that. Help support the growth of new companies so they can bring in more tax revenue in the long run. Or so the argument went.
Now that they're making money and it's time to pay up, of course, they've changed their tune. Suddenly they've discovered that the system they lobbied for and got is "unfair" and they still shouldn't pay taxes.
[1] https://www.sfgate.com/business/article/SF-Citi-video-plugs-...