
San Francisco proposes “IPO tax” on eve of Uber offering - kimsk112
https://www.axios.com/san-francisco-proposes-ipo-tax-uber-lyft-63d1d608-0819-44ab-860b-066371b08038.html
======
logicx24
San Francisco legislators' complete inability to understand economics never
fails to amaze me. There are twenty different taxes and bonds proposed every
single year by the city to "build affordable housing." And every year, that
money is squandered in regulation and red tape, while housing prices continue
to rise.

The issue here is, first and foremost, supply and demand. San Francisco has
made the process of building new housing so incredibly onerous that, once a
developer finally succeeds in erecting a building, the only ones they can sell
to are the wealthy. If it was easier to build in SF, with less regulation,
less restrictive zoning, and less expense, then housing would be built for the
middle class. Then, the city could apply affordable housing policies to
reserve units in middle income buildings, and the housing crisis could be
averted.

But instead, our legislature continually enacts nonsense like this, which
accomplishes little beyond rabble rousing.

~~~
abalone
Do you have sources for these claims? I feel this narrative is often repeated
on HN and it becomes kind of an echo chamber. Then I read in the SF Chronicle
that there’s permitted and approved projects that developers are not moving
forward with, like around the new hospital off of Van Ness, due to the
“tightening of capital markets” and “soaring construction costs.”[1] Not
NIMBYs or government regulations.

And then I dig a little deeper into the “it’s just supply and demand, dummy”
narrative and find articles that document how luxury housing development
actually is associated with a rise in rents for the working class.[2] Who
would have thought macroeconomics is complicated?

I feel the narrative here is highly politicized around are particular market-
driven philosophy, so much so that people feel comfortable posting unsourced
polemics. In the spirit of HN I would like to steer us toward a real analysis
of the facts in the ground.

[1] [https://www.sfchronicle.com/bayarea/article/Turns-out-SF-
s-b...](https://www.sfchronicle.com/bayarea/article/Turns-out-SF-s-big-new-
hospital-on-Van-Ness-13698405.php)

[2] [https://www.washingtonpost.com/business/economy/in-
expensive...](https://www.washingtonpost.com/business/economy/in-expensive-
cities-rents-fall-for-the-rich--but-rise-for-the-
poor/2018/08/05/a16e5962-96a4-11e8-80e1-00e80e1fdf43_story.html)

~~~
mrep
Not OP, but Seattle is almost as big as SF [0] (825,000 people in SF compared
to 775,000 people in Seattle), Seattle has 2.5x the number of cranes up
compared to SF [1] (65 cranes in Seattle compared to 26 in SF), Seattle rents
have actually gone down recently because of so much new supply [2], and
Seattle's average rent is only 57% of SF [3]. I'm not going to say it's just
NIMBYism, but whatever they are doing, they are a prime example of what not to
do.

[0]:
[https://en.wikipedia.org/wiki/List_of_United_States_cities_b...](https://en.wikipedia.org/wiki/List_of_United_States_cities_by_population)

[1]: [https://www.seattletimes.com/business/real-estate/seattle-
to...](https://www.seattletimes.com/business/real-estate/seattle-tops-the-
nation-in-tower-cranes-for-third-straight-year-as-construction-reaches-new-
peak/)

[2]: [https://www.oregonlive.com/business/2019/01/apartment-
rents-...](https://www.oregonlive.com/business/2019/01/apartment-rents-
dropping-in-seattle-landlords-compete-for-tenants-as-market-cools.html)

[3]: [https://www.investors.com/etfs-and-funds/personal-
finance/hi...](https://www.investors.com/etfs-and-funds/personal-
finance/highest-rent-us-cities/)

~~~
abalone
Ah, thank you for the sourcing. I shall read them but I was wondering if you
have a response to this critical analysis, "Seattle — A Cautionary Tale for
Supply-Side Housing Advocates."[1]

It notes how Seattle is often cited by deregulation advocates, but that "in
spite of decades of indisputably strong development, Seattle’s share of cost-
burdened renters has barely budged." And "by overbuilding housing for the
wealthy, Seattle has achieved some short-term improvement in affordability for
the middle class, at the expense of substantial displacement and continued
upward pressure on the most vulnerable."

This I think is at the heart of what in SF some call the YIMBY vs. PHIMBY[2]
debate. YIMBYs tend to skew towards more privileged techie types (happy to dig
up sourcing on this.. I recall the YIMBY national meeting being called
overwhlemingly white). Whereas the PHIMBYs or whatever you want to call them,
the deeply affordable housing advocates, see flaws in that simplistic trickle-
down economics model based on lived experience in working-class neighborhoods
undergoing gentrification.

[1] [https://knock-la.com/seattle-a-cautionary-tale-for-supply-
si...](https://knock-la.com/seattle-a-cautionary-tale-for-supply-side-housing-
advocates-5b4ca5ed6d02)

[2] [https://yahbayarea.org](https://yahbayarea.org) or
[https://twitter.com/YahBayArea](https://twitter.com/YahBayArea)

~~~
solidsnack9000
I upvoted you, although I disagree with you. You made an argument, deepened
the discussion and offered some sources -- it's more than most people do.

Regarding the second site that you linked, and the PHIMBY idea in general --
if it's summed up by "housing is a human right", then there is a certain
weakness built into it from the start. If you do not have a house, can you sue
someone? Can you sue the government, for example? That is an important part of
what a right is -- it provides a "cause of action", a basis for suit, when it
is abridged. If it doesn't provide that, then it is not a right.

Freedom of movement within the United States, guaranteed by the Privileges &
Immunities Clause of the Constitution, is a right. When someone writes
something like "by overbuilding housing for the wealthy, Seattle has achieved
some short-term improvement in affordability for the middle class, at the
expense of substantial displacement and continued upward pressure on the most
vulnerable.", they seem to be operating from a frame where it is the
government's responsibility to provide housing, but it's not clear where the
government gets that charter. Not every nice or good thing needs to be
effected by government agency. However, respecting the right of people to move
in -- to buy or rent property on the same terms as non-residents -- would seem
to be completely in line with a broad commitment to the equality of all
American citizens, regardless of their place of birth, before the law
everywhere in the country.

~~~
abalone
The essential view of PHIMBYs is that government should invest in housing,
which is the mechanism by which the postwar generation achieved housing
security (HUD had a huge budget).

Thanks for the upvote. Allow me to critique your argument. You focus solely on
interpreting the term “right” and suggest that it is beyond the charter of
government to provide housing, which is just completely and utterly
ahistorical.

~~~
solidsnack9000
When you say my argument is ahistorical, do you mean that in the past, people
have generally been able to sue for not having a house?

Calling housing a right is extreme and inaccurate.

------
kenneth
San Francisco is one of the most mismanaged major cities in the world and it's
on such a negative trajectory. It's blessed with an incredibly successful
homegrown tech industry, but there's only so much that can do to hide the
underlying disfunction and the cracks are starting to show.

As a VC in San Francisco, I've recently given up my residence here, and am
increasingly looking outward for tech and culture. I see many of my peers
doing the same, moving east, south, or out of the country entirely.

It's bittersweet. I used to love San Francisco, but have recently entirely
lost faith in it ever getting better. I've given up. And honestly, I feel a
weight lifted from not having to care and constantly deal with the frustration
anymore. There's so much tech & entrepreneurship worth promoting outside of
SF, and it's so often overlooked.

~~~
dsfyu404ed
It's not just SF. The whole state of CA is woefully mismanaged. They just have
enough money to smooth over much of the stupid stuff. When the money runs out
(next recession?) they are gonna get hit really really hard (and they deserve
it, stupid should hurt).

~~~
gamblor956
CA is actually quite well-managed. One of the reasons we pay so much in taxes
is precisely because CA legislators have a better grasp of financial realities
than their counterparts in red states: if you want to spend more, you need to
collect more money to pay for it.

And CA voters like to pay for things. Red-state voters do not; they like to
pretend that people will do things for free (i.e., teachers) until things
break and they accept the reality that nice things cost money.

~~~
remarkEon
How are you quantifying (qualifying?) "well-managed". If the metric we care
about is along the lines of cost of living, then it's arguably the worst in
the county. I could afford to buy a house in pretty much any Red State. What's
that a function of? People _not_ wanting to live there? I doubt it. I
sincerely doubt it, because every time this topic comes up here on HN we hear
stories about people leaving SF/SV for Austin or the South East - and there's
plenty of data showing an exodus out of the West Cost corridor. Will housing
costs go up in those areas? Maybe - but if/when there's a reshuffling I have a
lot more faith in city leaders in those other parts of the country not to use
the San Francisco checklist for "how to turn your city upside down".

>And CA voters like to pay for things. Red-state voters do not; they like to
pretend that people will do things for free (i.e., teachers) until things
break and they accept the reality that nice things cost money.

I think this point is also way off the mark. I should not have to shell out
thousands a year for _pre-school_ if I want my kids to be competitive. This is
the reality for friends I have in SF. Not so for friends in Houston or Austin.

I don't live in SF, but I turned down a job there entirely because of the cost
of living and that, at least from where I'm standing, the city is run by
idiots that are completely disconnected from reality. You might think I'm
conflating state and city government, and to an extent you're right, I am. But
as city leadership is so often a launch pad for state (and then national)
government I'm not particularly bullish on California's future.

~~~
dmode
Cost of living is high is because people want to live here. CA population is
actually going up.

------
jedberg
If SF wants more affordable housing, step one is to allow developers _to build
more freakin housing_! Then sure, you can tax IPO lottery tickets if you want.
Honestly it probably won't make any startup leave the city. The companies
don't bear the tax burden, the employee does. And I don't think a company is
going to lose out on employees simply because the employee doesn't want to
lose an extra 1.2% in their stock comp.

~~~
malandrew
> The companies don't bear the tax burden, the employee does.

When employees increasingly leave the SF Bay Area or refuse to relocate to the
SF Bay Area, driving up the cost of acquiring talent, the companies most
certainly are bearing the burden.

~~~
rsanek
Right, but the point is that this is a very slow feedback loop, at least
compared to e.g. taxing corporations directly.

------
throwawaysea
I would be OK with such a law if it only applies going forward, to companies
that are headquartered in SF and _formed_ only on this date or later.

But to pass an IPO tax after hard-working employees have put in literally
years of longer/more-stressful hours at reduced compensation levels (relative
to working at established companies) to get to this payoff is unfair and
unjust. Those employees have entered this arena (the startup game) with
certain expectations and rules in mind, which made taking on risk and
deferring gratification worthy to them. Pulling the rug out last minute to
shore up the city's own finances is punitive and unreasonable, especially when
the law is targeted so narrowly. And no, the fact that some of those employees
will get large sums of money out of this does not make it less unfair or less
unjust.

~~~
Zanni
Agree completely, although I'd frame it differently. I'm not sure how much
sympathy anyone has for the Uber folks specifically, but this would certainly
be food for thought for anyone thinking of starting a company in SF, or
contemplating shifting their headquarters.

Congress actually did something similar in 1980 when they passed a Windfall
Profit Tax on oil to capture "unfair" profits in the wake of the OPEC oil
embargo. It was wrong then, and it's wrong now.

[0]
[https://en.wikipedia.org/wiki/Windfall_profits_tax](https://en.wikipedia.org/wiki/Windfall_profits_tax)

------
pushcx
For anyone else immediately curious: the US's [ex post
facto]([https://en.wikipedia.org/wiki/Ex_post_facto_law#United_State...](https://en.wikipedia.org/wiki/Ex_post_facto_law#United_States))
law applies to retroactively deeming acts to be criminal. Challenges to
retroactive tax laws on this basis have not succeeded.

~~~
tvanantwerp
"Fun" fact: tax law is the one domain where "innocent until proven guilty"
does not apply. If the government says you owe money, the burden is on you to
prove that you do not.

~~~
dragonwriter
> "Fun" fact: tax law is the one domain where "innocent until proven guilty"
> does not apply.

No, it's not the one domain. “Innocent until proven guilty” applies only in
criminal law (neither “innocent” nor “guilty” even applies outside of the
domain of criminal law, much less that maxim about the relation between them.)

~~~
YjSe2GMQ
Indeed. There's much more symmetry outside of the criminal law. Not sure if
applicable to the US, but in my home country you can sue people if you want
money from them (as one would expect), but you can also sue "to determine
whether a payment is needed", which means you initiate a lawsuit that can
result in you paying the money. This may make sense if you deny the claim and
are wealthy (i.e. you could pay up) and want to speed up clearing the air.
Otherwise the claimant can wait a few years and use the court approved
interest rate (high) to hit you over the head a few years down the line.

~~~
dragonwriter
> Not sure if applicable to the US, but in my home country you can sue people
> if you want money from them (as one would expect), but you can also sue "to
> determine whether a payment is needed", which means you initiate a lawsuit
> that can result in you paying the money.

In the US this would be a suit for declaratort judgement in which formally you
asked the court to declare you did not owe money, but functionally it seems
generally similar.

------
overpricedhouse
I hope this dissuades any more startups from locating in SF. It's gotten to
the point where even highly paid software engineers cannot afford to live in
the city. The Caltrain is packed every afternoon with engineers evacuating to
the safety of MTV and Sunnyvale.

The lack of affordable housing is the reason I moved from SF, since my wife
and I wanted to start a family. I just wish more companies would do the same.

~~~
Apocryphon
The rest of the Bay Area from Berkeley to Morgan Hill is not much better in
terms of price. Perhaps more livable in terms of less density and less
flagrant poverty as S.F.'s urban environment, but the region in general is
already glutted.

------
seibelj
Yep - just a few more taxes and regulations will fix everything! And if these
don’t work, add a few more!

~~~
hashmap
Those silly legislators. Trying to pass laws to solve problems.

~~~
austenallred
If something doesn’t work, try it 99 more times!

------
GreaterFool
I said it before and I'll say it again... Japan has a great idea: make rent
deducible from salary before tax. Then if the city wants some tax revenue
they'd better have affordable housing!

------
varenc
Here's the actual proposal:
[https://sfgov.legistar.com/View.ashx?M=F&ID=7216619&GUID=22E...](https://sfgov.legistar.com/View.ashx?M=F&ID=7216619&GUID=22E765B8-90CC-45B5-9BC7-87E7C576F907)

It's very clearly targetting Uber's IPO by retroactively applying the tax to
May 7th. Though even the legislation seems uncertain that's legal.

It has a provision that if retroactive taxation is "held to be invalid or
unconstitutional by a decision of a court of competent jurisdiction" then it
will apply as soon as the new law is introduced...which seems the more usual
way of doing things.

(Was a pain to find...none of the news coverage linked to it.)

------
fosk
San Francisco's administration is the poster child of corruption and
mismanagement. It's a controversial topic because it comes across as a strong
and opinionated comment, but decades of failed policies, unaccountability and
lies give strength to the truth that the city of San Francisco is inadequate
to enforce law and order and help the people who are - in the tech capital of
the world - literally dying in the streets. I wish this was a bad dream, a
nightmare, but it's the real life.

Banning electric scooters, taxing IPOs, soda taxes are all distractions that
prevent the voters to focus on the problems that really matter: the needles,
the drug abuse, the human feces, the absolute lack of enforcement of the most
basic, essential, rules of society.

San Francisco must enforce the "Broken window policy", and it needs to start
from the broken politicians and local administrators that are betraying their
fiduciary duty and, by doing so, hurting the community.

------
mrosett
If they want to change the law going forward, then sure - they can continue to
cook the golden goose. I don't live there, so in the narrow sense it's not my
problem.

But changing it retroactively - dated to a few days before a particular
company's IPO - is banana republic shit.

------
noego
Can someone explain why they are raising taxes specifically for stock-based-
compensation and not for all high-income-compensation? What's so special about
lawyers and bankers making hundreds of thousands of dollars in cash-
compensation, that they deserve an exemption from these tax increases?

~~~
woah
Not to defend the bankers and lawyers, but they are taxed at the income tax
rate which is much more than 1.5% more than capital gains.

~~~
gsusisjnd
In California capital gains are taxed as ordinary income. You don’t get any
benefit at the state level for capital gains.

Also, under the new federal tax law, many lawyers are classifying their income
as qualified business income so they pay much less than ordinary income. This
is something that a software engineer working for a company couldn’t do.

------
mrburton
Imagine giving a child who is bad with money, more money to compensate for
their mismanagement of money.

------
chungleong
From a national security standpoint, it's probably a good thing if hi-tech
firms are dissuaded from the SF. A magnitude 9+ earthquake is going to hit the
area one of these days. It's simply inevitable. Making the city a critical
networking hub is sort of crazy if you think about it.

~~~
komali2
What datacenters are here? I thought everyone was throwing their servers out
in Utah. Would be a bit mad to build a server farm on land you could make
millions on building housing on instead.

~~~
eismcc
Sacramento

~~~
komali2
This wouldn't affect those data centers though

------
xxdesmus
The retroactive component will be tossed out by any sane judge. There’s no way
that’ll hold up in court.

------
rkayg
I really hope this brings more jobs and businesses to Oakland. Oakland has a
lot more undeveloped space, better major rail access (BART / Amtrak), and is
way more open to newcomers (both business and individuals). Does anyone know
what happened with the Square office (formerly Uber) in Oakland?

~~~
rkho
Square leased it at the end of last year and if this[1] article is to be
believed, they won't move in until end of this year at the earliest.

[1]: [https://sf.curbed.com/2018/12/21/18151762/square-uptown-
stat...](https://sf.curbed.com/2018/12/21/18151762/square-uptown-station-
lease-oakland-uber)

------
ultrasaurus
Earlier article with more information:
[https://www.sfchronicle.com/politics/article/Here-come-
the-I...](https://www.sfchronicle.com/politics/article/Here-come-the-IPO-s-
and-here-comes-a-proposal-13790280.php?psid=3JjOR)

------
baron816
>Opponents argue it will discourage startups from locating in the city

This may not be a bad thing. And not from a cynical, anti-capitalist, “keep SF
shitty so poor people can live here” point of view. The country would really
benefit if tech companies were more spread out.

~~~
dehrmann
Second-order (mostly service sector) would, but the network effects and job
flexibility of sector hubs is means concentration is better for the industry.
Depends what you're optimizing for; there's pros and cons to specialization.

------
ummonk
Would a retroactive tax like this be constitutional?

------
jmpman
If anything, this tax should go to repay San Francisco taxi medallion owners.

~~~
33MHz-i486
why, the city sold a fresh batch of medallions to raise funds, took their
money, then refused to give them a refund after CPUC legalized ridesharing
across the state. Who's really at fault?

~~~
jmpman
You’re suggesting that Uber didn’t have lobbyists involved? My view is that
Uber manipulated the system (I don’t agree with the previous system), and the
people who suffered are the medallion holders.

~~~
LanceH
The whole reason there are medallions is that there is so much taxi money
lobbying to limit entry to the market.

~~~
jmpman
How likely are disparate medallion owners to hire a lobbyist and influence the
legislature versus Uber?

~~~
LanceH
The medallion restrictions and lobbying goes back decades before Uber. There
would be no Uber without the taxi lobby backed, government enforced,
artificial restriction on supply.

------
ForHackernews
Sure, why not? Uber fights dirty with municipal government, might as well
fight dirty back.

~~~
bob_loblaw
But passing this tax will affect all future IPO's. If the city wants to take a
hard line with Uber, then do that. But don't pass a tax that affects all
companies going public. That just puts an incentive for startups to move
outside the city before going public. Is that a good thing? Is that what the
city of SF wants? I don't know, but giving a reason for all these workers to
commute up and down the peninsula seems silly. Especially because CalTrain is
already insanely crowded as are the roads.

