California Lt. Gov. Gavin Newsom visited Texas recently with a delegation of state legislators. The highly publicized trip was to find out what exactly has been luring businesses and other job creators to the Lone Star State.
“We are here out of frustration and admiration for some of the work you have been doing,” Newsom told Gov. Rick Perry.
But the former mayor of San Francisco really didn’t have to make his cash-strapped state pay the airfare from Sacramento to Austin; he could have learned some valuable principles on how to grow the economy right there in his old stomping grounds.
Recently, social network giant Twitter announced plans to move its San Francisco headquarters into roomier facilities, likely in preparation for going public, which could dramatically multiply the staff size.
Just one problem: The city of San Francisco not only imposes a 1.5% payroll tax on companies, but also levies a local tax for exercising stock options. For a growing company about to go public, those kinds of city taxes are just bad for the bottom line.
So in an effort not to lose Twitter to Silicon Valley—or the 2,000 jobs it’s projected to create over the next several years—San Francisco supervisors voted April 19 to make a deal called the “Twitter tax break.” If Twitter moves its new headquarters into the rundown “Mid-Market” neighborhood to help revitalize that area, it’ll earn a six-year exemption from both the local payroll and stock options taxes.
Now other hot San Francisco-based Internet companies such as Zynga Inc., Mozilla and Yelp! are demanding to be let in on the deal.
Furthermore, the talks have spurred Mayor Ed Lee and a panel of supervisors to have a more in-depth conversation about the current city tax climate and how it affects business. Now that’s what Texans call “a good start.”
It’s no secret: business-friendly tax policies reward communities with investment, job creation and economic growth--- Texas knows this, and San Francisco is learning the same thing.
If Lt. Gov. Newsom is tired of losing businesses to Texas, perhaps a visit to San Francisco is now in order so he can learn how to keep the rest of California’s companies through the benefits of lower taxes—the San Francisco Tweet.
Erin Humiston is Director of Policy Communication at the Institute for Policy Innovation (IPI), an independent, nonprofit public policy organization based in Dallas, Texas.
April 26, 2011