The Cost of Doing Business
Introduction
In February 2023, the Bay Area Council Economic Institute issued a report that analyzed business tax structures across 20 of the region’s largest cities. For each of those cities, we calculated the annual business tax payment for three hypothetical companies in office-based industries using business tax rates in each jurisdiction. In all three examples, estimated tax liabilities in San Francisco were far beyond other Bay Area cities – with only Oakland approaching a similar scale to San Francisco. As such, we concluded that San Francisco’s business tax regime created a disincentive for companies to add employment in the city and was a driving force behind relocations to other parts of the Bay Area.
In June 2026, San Francisco voters will decide on Measure C and Measure D, both of which would adjust the city’s business tax structure. As these measures come before voters, this report seeks to better understand how business tax levels are impacting the city’s economy. This report also builds on the initial report by comparing San Francisco tax levels and economic activity to other peer jurisdictions around the U.S. While our first report came at a time when San Francisco was experiencing multiple high-profile headquarter departures to other parts of the region, this report comes at a time when the city’s economic growth has slowed compared to other parts of the country. The business climate issues uncovered here point to a foundational issue for San Francisco – the city’s cost of doing business is outweighing the benefits it provides, prompting companies to reconsider how they deploy talent in the city.
This report is broken up into two parts. The first sheds light on the city’s economic recovery, with a particular focus on the downtown area. The second part dives into San Francisco’s business tax structure and compares it to other peer jurisdictions. Taken together, these sections show San Francisco remains a high-cost environment for businesses relative to its peers, and its tax system continues to shape firm behavior and investment decisions. Without more substantial adjustments to the city’s business tax framework, San Francisco may face continued challenges in attracting and retaining employers, prolonging its downtown recovery and constraining its prospects for future growth.