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LWV League of Women Voters of California Education Fund
Smart Voter
San Francisco County, CA November 4, 2008 Election
Proposition Q
Modifying the Payroll Expense Tax
City of San Francisco

Ordinance - Majority Approval Required

Pass: 233,411 / 74.20% Yes votes ...... 81,178 / 25.80% No votes

See Also: Index of all Propositions

Results as of Jan 24 10:41am, 100.0% of Precincts Reporting (580/580)
Information shown below: Fiscal Impact | Yes/No Meaning | Arguments |

Shall the City specify that certain partnerships and other businesses are subject to the City's payroll expense tax and expand the payroll expense tax exemption for small businesses so that businesses with annual payroll expenses of $250,000 or less would not have to pay the tax?

Fiscal Impact from City Controller:
Should this ordinance be approved, in my opinion, it would result in a net annual tax revenue increase to the City of approximately $10.5 million. The ordinance would change the number and types of businesses in the City that pay the payroll tax.

Some types of corporations compensate their partners by paying them a share of the firm's annual profits in addition to any salary paid for services rendered. Currently, the City's payroll tax is not paid on these profits. The proposed ordinance would require the payroll tax to be paid on all partner compensation, excluding returns on investment, and would result in additional gross annual tax revenue of approximately $17 million. The businesses that would be affected are typically law, accounting, medical, and other types of professional corporations.

The ordinance would also increase the small business tax exemption. Currently, businesses with a payroll of up to $167,000 do not have to pay the payroll tax. The ordinance would raise this limit to $250,000 exempting additional businesses, and resulting in decreased gross tax revenue of approximately $6.5 million.

Meaning of Voting Yes/No
A YES vote on this measure means:
If you vote "yes," you want to specify that certain partnerships and other businesses are subject to the City's payroll expense tax, and you want to expand the payroll expense tax exemption for small businesses.

A NO vote on this measure means:
If you vote "no," you do not want to make these changes.

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Arguments For Proposition Q

San Francisco's small businesses are the backbone of our neighborhoods and local economy. They create jobs, provide services and contribute to the vibrant, diverse city we love. Voting YES on Proposition Q helps small business by increasing the small business payroll tax exemption + and at the same time closing a loophole for large downtown firms that aren't paying their fair share.


Proposition Q significantly increases the number of small businesses who will be exempt from our local payroll tax. Currently, a business is exempt if its total payroll is under $166,000 per year. Proposition Q increases the threshold to $250,000 + helping more than 1,600 borderline and at-risk businesses who need a boost.

This will enable our small businesses to hire more employees, expand benefits, and provide additional services to our communities.


While local small businesses pay their fair share, many large partnerships + such as downtown law firms + have found a way to avoid paying their share of the payroll tax. Tax experts estimate that the city loses up to $19 million each year because of this loophole.


Democrats and Republicans, labor and business, and neighborhood advocates from every corner of San Francisco are uniting to close the loopholes and help small business. Please join us and vote YES on Proposition Q.

San Francisco Democratic Party
San Francisco Small Business Advocates
San Francisco Firefighters Local 798
Board of Supervisors President Aaron Peskin

(No arguments against Proposition Q were submitted)

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Created: January 24, 2009 10:41 PST
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