San Francisco writes Twitter a tax break

Board of Supervisors votes 8-3 in favor of keeping the influential microblogging company in the city

Financial trends and news by Ronny Kerr
April 6, 2011
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It’s morning in San Francisco and the birds are tweeting with glee.

In a split 8-3 vote, the city’s Board of Supervisors approved a proposed tax break for growing companies, but especially Twitter, if the companies move or stay in the Mid-Market and Tenderloin districts west of downtown.

"Central Market and the Tenderloin have been burdened with high vacancies and blight for decades,” said Mayor Ed Lee. “[T]he payroll tax exclusion is a powerful tool that will help us bring in much-needed jobs, services and retail.”

We first reported back in January that Twitter was considering a move, possibly to Brisbane, to a 200,000 square foot complex that formerly served as the campus. Talk of giving Twitter a tax break had already begun then.

As a result of this week’s vote, Twitter’s payroll taxes will be capped at their current level for the next six years, meaning it will only pay for existing employees, not new ones. This is significant for Twitter because the company currently employs only around 350 people but plans on expanding aggressively over the next few years, adding 2,000 more jobs. Over the course of six years, the microblogging could save $22 million in tax expenses.

It’s not necessary to explain why that’s great for Twitter.

For the tax break’s supporters, it’s about revitalizing broken neighborhoods with the presence of some of the world’s most influential tech companies.

"It is a first step forward of really trying to bring back these neighborhoods and it is a first step forward for making sure that we get our economy back on track," said Board of Supervisor President David Chiu.

Dissenters argued merely for the status quo, that companies simply pay the taxes they’re meant to pay. Supervisor John Avalos specifically said that everyone, including booming tech companies, have a “social responsibility,” to pay for taxes.

Avalos is also concerned that the approved proposal sets a bad precedent, as San Francisco is home to several growing companies, like Zynga and Yelp.

With all these companies, it’s a fine line between encouraging them to grow freely and also using their growth to help the city improve. While some are disappointed that Twitter will be paying San Francisco less in taxes, supporters point out that the company would have left otherwise, cutting out jobs and any taxes at all.

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