Proposition N - Property Sales Tax

Voter Guide
November 1, 2010
This measure appeared on the November 2010 San Francisco ballot.

 

What it does

The City and County of San Francisco charges a tax on the transfer of each property, whether residential or commercial, within the city's boundaries. Under current law, the tax is equal to a percentage of the property's sale price and ranges from 0.5 percent to 1.50 percent of that amount.

The proposed legislation would split the highest bracket, and raise the tax paid on the sale of certain properties. It increases the transfer tax rate from 1.5 percent to 2 percent (a 33 percent increase) for transactions of $5 million to $10 million, and to 2.5 percent (a 66 precent increase) for transactions greater than $10 million. This higher rate would apply to the entire value of the building, not just the value of the building in excess of $5 million or $10 million.

San Francisco's Transfer Tax: Current and Proposed
Sales PriceCurrent RateProposed
< $250k0.50%0.50%
$250k - $1M0.68%0.68%
$1M - $5M0.75%0.75%
$5M - $10M1.50%2.00%
$10M+1.50%2.50%
Regional Sales Tax Comparison
Alameda1.2%
Berkeley1.5%
Oakland1.5%
Hayward0.45%
Albany1.15%
San Jose0.33%
Palo Alto0.33%
Santa Rosa0.2%

The City Controller's Office estimates that if this measure had been in place from 2001 through 2009, it would have resulted in additional revenue ranging from $6 million to $90 million annually, with an average of $36 million annually during that period.

When San Francisco's transfer tax for properties over $5 million was doubled in November 2008, it became equal to the highest rate in the Bay Area (which at the time was the same in Berkeley and Oakland). Prop. N would raise the rate to approximately 67 percent more than the next highest rate charged in other Bay Area localities for the highest tax bracket.

The new revenue would not fund any specific expansion of public services, but would instead go into the City's General Fund.

Why it is on the ballot

Like virtually all jurisdictions in our country, City government in San Francisco is facing budget deficits because of the recession. In an effort to raise additional revenue for the City's General Fund, the Board of Supervisors considered placing several taxes on the November 2010 ballot. This was one that some believed had a chance of passing.

The Board of Supervisors voted 8-3 to sent the measure to voters.

Pros

  • This measure could help fund a full range of public services in San Francisco.
  • Proposition N targets high-value properties, and should have no impact on the property values for most San Francisco property owners.
  • Transfer taxes are an appropriate place to increase taxes, because they extract value from property only at the point of sale, and do not provide a direct incentive against economic activity such as job creation. Because the value of property inextricably is linked to the level and quality of public investments, it is appropriate for the City to extract a higher percentage of value at the point of sale as a way to partially recoup its investment.

Cons

  • San Francisco faces deficits primarily because its expenditures are growing faster than its revenues. Until the City can control its rapid growth in spending, it is not appropriate to increase taxes, as it provides no incentive to control spending growth.
  • By attempting to make this tax "progressive," this measure continues the troubling trend of asking voters to "tax someone else" rather than levy higher taxes on themselves.

SPUR's analysis

We are not convinced there is a significant public benefit to justify this tax increase. While SPUR believes that transfer taxes are, in general, an appropriate place to increase taxes because they extract value only at the point of sale, this tax was doubled just two years ago. San Francisco needs to look to other solutions that focus on addressing our structural deficit.

SPUR recommends a "No" vote on Proposition N.