Court Saves S.F. $10 Million, Throws Out Challenge to Payroll Tax

Gloria In Excelsis Deo!
San Francisco isn't getting many financial gifts this holiday season. So it's with great cheer we welcome a recent decision by the California Court of Appeal to throw out a lawsuit challenging the legality of the city's payroll tax. Wait, what's that under the tree? Another gift: This fiscal year, the tax is now expected to come in 3 percent higher than expected, at $345 million, according to the city Controller's office.

This March, San Francisco attorneys were required to begin paying a new type of payroll tax. Enacted by voters in Nov. 2008, this measure dings members of professional partnerships 1.5 percent of their take, as long as their firms make more than $250,000. Local resident John Chiatello sued for declaratory relief, claiming the ballot measure was invalid.

However, a trial court found that Chiatello couldn't be granted relief, because he suffered no pain to begin with -- he wasn't subject to the special tax. An appeals court recently voiced its agreement with the earlier decision, just in time for the holidays.

Since the city collected some $10 million more under its current form of payroll tax than the previous method -- well, Merry Christmas indeed.

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