San Francisco’s ‘homeless tax’ helps spur departure of another high-profile company

Will Uber be the next tech company to bail on San Francisco? (WikiMedia image)

Less than a year after losing by far its biggest-grossing company to Texas – the pharmaceutical giant McKesson Corp. – San Francisco is losing another high-profile firm. Stripe, a financial software company that is the second-highest valued start-up in the U.S., is moving to South San Francisco.

Both McKesson and Stripe were unhappy with Measure C, the “homeless tax” approved by San Francisco voters last November that requires companies based in the city, which have more than $50 million in annual revenue, to pay a levy based on their gross receipts. McKesson moved to Irving, a suburb of Dallas, which has no such tax and much lower overall corporate taxes. While South San Francisco is not as cheap as Irving, it doesn’t have anything akin to San Francisco’s tax, which has helped the city attract many tech firms, in particular biotech giant Genentech.

“Unfortunately, Stripe choosing to leave town is not an anomaly,” Alex Tourk, spokesman for the sf.citi tech trade group, told the San Francisco Chronicle. He said the business community needed to “work together [to] … establish a fair and equitable tax system that we can all rely on.”

But as the fight over Measure C reflected, there is a huge split among San Francisco tech firms. Marc Benioff – the billionaire chief executive of Salesforce, the city’s largest employer – and company employees provided millions in funding to the pro-C campaign. Benioff has disparaged tech firms which balked at the measure and appears open to even more tax measures to deal with San Francisco’s homeless crisis.

“This is a humanitarian emergency and it demands an emergency response,” Benioff wrote last year in an op-ed in The New York Times.

Uber moving entire departments to Dallas

But will more tax hikes be accepted by Uber, one of the city’s most prominent and famous start-ups? Uber was neutral on Measure C. And in a move with parallels to the actions of McKesson before it moved out, Uber announced in August that it was setting up a “second headquarters” with 3,000 employees in Dallas after being wooed for years by city leaders, who provided $36 million in incentives and tax credits.

“Dallas became the first city in Texas where the Uber app was available in 2012, and since then Texas has been a hub of innovation for our platform,” Dara Khosrowshahi, CEO of Uber, said in the company’s announcement. “Uber is excited to bring this major investment to Texas and to increase our commitment to the city of Dallas.”

Yet Uber officials said that too much should not be read into its decision and that San Francisco would remain its headquarters. Uber said there was no change in its plan to move into 500,000 square feet of new office space at the huge, high-tech new Chase Center next year.

Nevertheless, the Dallas Business Times reported that Uber was moving entire departments to Dallas, including the Uber Eats team, and its legal, human resources, recruiting, finance and business development units.

That’s similar to what McKesson did before it confirmed it was leaving San Francisco permanently.

Uber has an even stronger motive to leave than McKesson or Stripe, which are considered healthy companies. Uber lost $5.2 billion in the second quarter of 2019, the company announced in August. Its stock price is down about one-third since then, and analysts are mixed about its future.



Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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