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Why Twitter (and your company) Would Leave the City for the Suburbs...

Why is Twitter thinking about leaving San Francisco proper for the (shudder) suburbs?  Twitter is the epicenter of cool.  They belong in SOMA, right?

Right.  Until you start doing the math.

Twitter is thinking about moving to the suburbs for one reason.  Stupid payroll taxes that San Francisco put in place because they thought they could.  Other cities, like my own Birmingham, have done the same thing.  Then they complain about the flight to the suburbs.

Note to San Franciso and any other city with these types of taxes.  Like Ice-T once said, "You played yourself".  More on the potential move from Business Insider:

"Twitter will be hit with $35 million in city payroll taxes over the next six years if it stays in San Francisco -- and that's only if the city enacts a tax break. The bill will be tens of millions of dollars higher without the break.  

Worse yet, Twitter will have to move to a blighted area of town and spend about $30 million on renovations just to get the tax break at all. The estimates come from a new report by the San Francisco Controller's office, which supports establishing a new economic development zone southwest of downtown. The main benefit of the zone would be the temporary exemption of stock options from the city's 1.5% payroll tax. 

This tax is San Francisco's second-biggest source of revenue, and contributed $345 million to city coffers last year. But as TechCrunch has reported extensively, no other city in the world has this kind of tax, and it could cost pre-IPO companies located in the city -- like Twitter and Zynga -- tens of millions of dollars when employees exercise their options."

When I was a part of the DAXKO team, our CEO (David Gray) was shopping a new headquarters in Birmingham.  He wanted to show support for the city by locating in a hip area off downtown.  The move, without any proactive adjustments, would have been the equivalent of a pay DECREASE for all our team members due to the unbelievable payroll/occupational taxes that exist within the traditional city limits.

The city of Birmingham is lucky to have folks like David Gray as corporate citizens, who believe in the city and want to show support through the location of their businesses.  That deal ultimately fell through due to property availability and development issues, but you have to ask yourself - why would the city have the taxes in place and then bemoan the flight of the most successful startups to the suburbs?

Answer - because they can and don't have any other revenue ideas.  They'd rather tax the hell out of the utility workers who won't be going anywhere than think about development and retention of the smaller fish.

Good luck Twitter - See you in San Mateo or on Sand Hill Road (see below) in 2013...


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Comments

Dwane Lay

Long distance high five for the gratuitous Ice-T reference.

Also, don't discount the "pain-in-the-toucas" factor of having to get to those hip, downtown locations when your employees don't live nearby, probably for the same reason.

Interviewer

I moved from the Ham to a state with no income tax, and the same sales tax rate. Not only did I get a raise from the same salary, I had better amenities from the same size municipality, like public transportation, green space, more parking, paved roads, etc. The only thing Birmingham did better was fight about the money they were wasting. I grew up in Birmingham and started my career there, but those city leaders have a lot of growing up to do. I'll take the raise and more benefits every time.

AC

Word. It's wickity wickity wack, yo.

EC

Excellent point. Especially from one in the 'Ham who had taxes based on residence, as well as where our office is in Southside. You know those W2 people love cramming all that on the form at year end. Some payroll software programs don't even allow for multiple taxes.

barbara

They could move to Trenton NJ and make a great deal with the city , we need healthy businesses here and housing is cheap! Not to mention NYC and Philadelphia are both nearby.

san mateoan

A heads-up, Sand Hill Road referred to in the article is most likely the one in Menlo Park, running alongside Stanford campus, and not the one in Orinda.

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