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Twitter tax break from San Francisco city hall sparks controversy

By Andrew Moran     Apr 3, 2011 in Business
San Francisco - The mayor of San Francisco and some city hall legislators are in a disagreement over a possible tax break for technology start-up businesses, including the social media networking giant Twitter, that would make them stay put in the city.
In 2006, Jack Dorsey, Biz Stone and Evan Williams founded Twitter, a microblogging and social networking website that would allow users to generate text-based messages up to 140 characters. The website has more than 200 million users and earns approximately a projected figure of $150 million.
The company was established with a few hundred employees, but is expected to increase that number to about 3,000. Therefore, Twitter is looking to expand its size, but this would also lead to a higher tax bracket.
According to the San Francisco Gate, Mayor Edwin Lee and city supervisors, including Ross Mirkarimi and Board of Supervisors President David Chiu, are working hard on updating measures that would allow technology start-ups to stay in the city of San Francisco.
One initiative proposed would entail a two-year suspension on taxing employee options. This would apply to tech companies anywhere in the city that maintain 100 or more employees and not publicly traded.
The original law allowed city hall to tax company payrolls and employee stock options, notes NBC News.
“This is the moment we have been waiting for,” said Lee of the proposal. “The transformative nature of an anchor tenant like Twitter will revitalize this community.”
Numerous tech companies in San Francisco, such as Yelp and Zynga, have openly stated that due to the city’s tax code, it is difficult to stay in the city due to their financial situation. Twitter has said in the past that it may relocate to Brisbane because of the tax codes, reports the San Francisco Business Times.
The Associated Press reports that many in city hall are upset over the proposed tax breaks because they feel since the city is facing massive layoffs, an enormous budget shortfall and high real estate prices, lawmakers are bailing out venture capitalists.
“Who are the [Twitter] investors?,” said Supervisor John Avalos, reports the San Francisco Chronicle. “Probably some of the wealthiest people in this country. And we are giving them more wealth.”
San Francisco residents are also upset over the proposed tax break. Numerous residents protested outside of Twitter’s headquarters because they believe the company has not been a good neighbor and has not lived up to many of its pledges. Therefore, some of them are against tax cuts for Twitter and others.
“The residents are feeling that if they're not going to benefit from this revitalization that the city is pushing for, it really doesn't make sense for these companies to stay in San Francisco,” said the director of South of Market Community Action Network, Angelica Cabrande.
Twitter has not yet commented on the tax break discussion.
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