San Francisco's Tech Tax Is Not a Solution to Homelessness

San Francisco's Tech Tax Is Not a Solution to Homelessness

If higher taxes were the cure for homelessness, California — and San Francisco, in particular — would have solved its homeless problem years ago. 

In reality, San Francisco — one of the highest tax jurisdictions in the country and a poster child for progressive governance — is overrun with homelessness.

It’s not a new problem; anyone who has been to San Francisco in the last couple of decades has seen it. And while the city has taken steps to move the homeless into alternate facilities, it appears that more continually arrive to take their place, keeping the homeless population unacceptably high.

What can be done? Well, a couple members of San Francisco’s Board of Supervisors have decided that higher taxes is the solution to the problem of homelessness.

The “tech tax,” as it’s being called, would be an additional 1.5 percent payroll tax assessed against tech companies. Because economists generally agree that payroll taxes come out of compensation, this is really a tax on tech workers, not tech companies. 

That’s right. Those who govern the City of High Taxes by the Bay have decided that even higher taxes — targeted at their most productive residents, the tech community — will solve the problem of homelessness. 

This proposal tells us several things.

First, California is still in denial on taxes. Businesses and residents are fleeing the state’s high-tax, high-regulation climate, and yet those who govern continue to pile them on.

Second, San Francisco continues to misdiagnose the causes of its homeless problem. Homelessness is not caused by other people’s wealth; it’s not caused by low taxes. All major cities — in a variety of climates and economies — have to manage homeless populations; they all seem to do a better job than San Francisco.

Third, if enacted, the revenue will likely end up going to pay for city employee pensions and other general obligations rather than specific mitigations of the homeless.

The tech tax is a revenue grab against an easy target — not a real solution. 

And it won’t work. Here’s a prediction: absent more substantive policy changes, the homeless problem in San Francisco will be roughly the same five years from now, with or without a tech tax. 

Businesses generally make rational decisions, based on empirical data, about where to invest and where to locate their enterprises. Governments generally make irrational decisions, based on wrong diagnoses and false assumptions. San Francisco’s tech tax is just the latest example.

Tom Giovanetti is president of the Institute for Policy Innovation (IPI) in Dallas.

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