San Francisco voters will decide on two tax measures at the ballot box in November.
Proposition L would impose an additional tax on revenue from rideshare companies and autonomous vehicles, while Proposition M would make a series of changes to business taxes.
The two measures have received mixed support from the San Francisco Chamber of Commerce, which has endorsed the new business tax plan, but opposed the new tax proposed by Prop. L.
Prop. L: Additional transit tax
Prop. L would add an additional gross receipts tax on a progressive tax scale starting with a 1% tax on a company’s annual gross receipts over $500,000 and increasing to 4.5% on annual gross receipts over $25 million.
The money would be directed toward the San Francisco Municipal Transit Agency, SFMTA, to maintain or expand Muni service and bolster fare discount programs for seniors and other riders. Funds would also be aimed at expanding service to public schools, libraries and parks.
The proposed ordinance makes explicit that the funds raised, which city Controller Greg Wagner estimated would be about $25 million annually, would be deposited to the SFMTA for service expansion.
But the proposition’s detractors, which include a political action committee that Uber has given substantial financial backing, noted that there is no audit mechanism or citizens oversight panel established by the measure to ensure the money would be used as intended or have the impact advertised by its supporters.
They further argued that the funding would not have a significant impact on the looming financial crunch facing the transit agency. The agency will face annual deficits of between $239 million and $322 million starting in fiscal year 2026-27.
The San Francisco Chamber of Commerce, the California Nightlife Association and the Golden Gate Restaurant Association criticized the measure for its lack of accountability for the additional revenue and said the measure would only mask bigger problems with SF Muni’s funding.
“This tax only raises a tiny fraction of the funding Muni needs, with no plan to spend it,” the Chamber of Commerce wrote in its ballot opposition message on the measure.
Uber has contributed $750,000 to the campaign against the proposition as of Thursday, according to campaign finance data. The company referred questions to the campaign against the proposition, No on L.
John Whitehurst, a spokesman for the campaign against the measure, said the committee was glad to have Uber’s support.
Prop. L would add an additional gross receipts tax on a progressive tax scale starting with a 1% tax on a company’s annual gross receipts over $500,000 and increasing to 4.5% on annual gross receipts over $25 million.
“The No on L campaign unites drivers, riders, businesses of all sizes, and community leaders against a massive new rideshare tax that lacks transparency and fails to address Muni reforms,” he said in a statement.
The proposition is supported by a majority of the San Francisco Board of Supervisors, the Sierra Club, and the nonprofit advocacy organization San Francisco Transit Riders. They argued the money would make a meaningful difference in Muni’s operations, as it faces the loss of state and federal funding that have kept it afloat amid plunging ridership following the COVID-19 pandemic.
“Muni is facing severe cuts due to the end of emergency federal funding, which kept our transit running through the pandemic,” a Transit Riders representative wrote for the proposition’s ballot argument.
“These cuts will mean reduced Muni hours and frequency, and likely whole lines eliminated. Prop. L will provide enough critical funding now to protect up to a dozen bus lines from getting cut,” the group said.
Some of the same organizations who came out against the rideshare tax proposed by Prop. L expressed support for the change in business taxes proposed by Prop. M.
Prop. M: Small business tax reforms
Prop. M would make several changes to the business tax code, perhaps most notably raising the exemption for small businesses from paying any tax from $2.25 million in annual gross receipts to $5 million in annual gross receipts.
The San Francisco Chamber of Commerce and Golden Gate Restaurant Association said that could help as many as 2,700 small businesses gain exemption status.
“Proposition M will also significantly reduce business license fees for restaurants, hotels, arts venues, and neighborhood stores,” the group’s representatives wrote in the proposition’s proponent’s argument.
“More than 90% of our local restaurants will have lower tax burdens, with 88% paying no business taxes at all. Lower taxes will allow our neighborhood businesses to thrive. Proposition M will simplify our current tax system, making it more predictable for business owners and the City. This will help preserve essential services while working towards a more vibrant, clean and safe downtown,” representatives wrote to voters.
Prop. M would make several changes to the business tax code, perhaps most notably raising the exemption for small businesses from paying any tax from $2.25 million in annual gross receipts to $5 million in annual gross receipts.
The proposition’s opponent argument was written by San Francisco Republican County Central Committee delegate Larry Marso, who argued the higher taxes on bigger companies could cause them to cut jobs.
Proposition M introduces new tax rates that dramatically increase the burden for many businesses in San Francisco,” Marso wrote. “While some small business might see minimal changes, others- especially mid-sized and large employers — face doubled or even quadrupled tax rates.”
The measure has been supported by Google, whose lobbying arm Google Client Services LLC has donated $500,000 in favor of the proposition as of Thursday, according to campaign finance data.
The new tax scheme would raise business tax rates to between 0.1% to about 3.7% from the current rates ranging from 0.05 to about 1%, increase the small business exemption, reduce the number of different business categories from 14 to seven, and change the way many non-sales businesses calculate their tax from one based on payroll to one based on revenue.
Proposition M would also lower the threshold that requires a business to pay an additional homelessness gross receipts tax from those with gross receipts over $50 million to businesses with gross receipts over $25 million. It would also raise the top rate of that tax from 0.69% to 1.64%.
City Controller Greg Wagner said in his analysis of Prop. M that it would cost the city $40 million a year for the first three years of implementation, before raising revenue by $50 million annually starting in fiscal year 2028-29. He said the initial lost revenue would be made up by fiscal year 2029-30.