Outside the tallest tower in San Francisco. Photo: Paul Chinn/The San Francisco Chronicle via Getty Images

To lure businesses to ailing downtown San Francisco, officials are calling for a change in corporate taxation.

The big picture: The city has long had high corporate taxes, but companies still flock here for access to talent, venture capital and the “seal of approval of being in San Francisco,” Jeff Bellisario, executive director of the Bay Area Council Economic Institute, told Axios.

• But with the rise of remote work amid the pandemic, more companies are “reconsidering their physical footprint” and evaluating their “cost of doing business,” which includes local taxes, Bellisario said.

Why it matters: Some companies, like Meta, are downsizing their San Francisco footprint, while others, like Coinbase, have gone entirely.

• Today, over 25% of San Francisco’s office space is vacant.
• The city faces a potential deficit of $728 million over the next two fiscal years, due in part to lower-than-expected property tax receipts.

Details: Mayor London Breed’s recently unveiled plan to revitalize downtown San Francisco provides tax incentives of up to $1 million over three years for companies opening new offices here.

• For more permanent changes, the mayor also called on the city’s controller and treasurer to develop a possible tax reform measure, for residents to vote on in 2024, that would “allow San Francisco to better compete with its peer cities when it comes to it.” to attract new businesses,” the mayor said in a press release.

Using the numbers: A San Francisco tech company with 250 employees and total revenues of $750 million would pay about $10.4 million in local taxes, according to analysis released this month by the Bay Area Council Economic Institute.

• The same hypothetical company would pay just over $4 million in Oakland and $2.7 million in Berkeley.

• It would pay around $50,000 annually in South San Francisco and $17,118 in San Jose.

What you say: “Cities that consider themselves business-friendly want these taxes to be as low as possible because they can use that as a selling point when trying to attract businesses from across the country or companies moving out of San Francisco,” said Bellisario.

In the meantime, Supervisor Dean Preston said he was disappointed with Breed’s plan, which he says “prioritizes tax payments to big corporations.”

• Instead, Preston wants the city to focus on “neighborly small businesses, much-needed affordable housing, and a functioning public transportation system.”

What’s next: The board of directors must approve any short-term tax breaks proposed by the mayor.

• Supervisor Aaron Peskin told the SF Business Times what the 2024 tax measure might look like: “Let’s see where our economy goes.”

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