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Comment by codefreeordie | Hacker News Reader

This headline is combining two separate items with separate causes.

PayPal is closing the SF office because the new tax regime makes their business model nonfunctional (as it does to all payments businesses). The tax would be effectively based on payment volume, rather than profit, and so more than their entire margin would burn up in taxes.

Separately, PayPal is laying off staff across their other offices to cut expenses and transition further from a growth-of-revenues model to a model of stable revenue at lower cost. Now being not the time to try to have rapid growth in the space if you're already the entrenched player, at least according to them.

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That is not how the tax works. It taxes gross receipts, in this case meaning Paypal's fees, not its total payment volume processed, because it only applies to amounts that would be considered income to Paypal for federal income tax purposes. Furthermore, the tax is allocated based on payroll, meaning that the tax is prorated based on the % of employees based in the city of SF vs elsewhere.

Paypal reported net income (i.e., profits) of almost $4 billion last year on roughly $25 billion of revenue on roughly $1.250 trillion of payment volume. Only approximately 550 of their 26,500 employees were located in the SF office, meaning that their effective GRT rate would have been .016%, for a tax of roughly $4m, or approximately their costs for 10 employees. They can afford the gross receipts tax.

I’m not sure I agree with your numbers, but even if they are correct, the tax punishes them for growth: growing their workforce or growing revenues.

Well, looking at the numbers it does not seem to be that big of a punishment.

By anyway, punishing growth should be valid, IT workers are doing well, the homeless that are to be helped is not like they gonna be hired as software devs at PayPal.

Taxes are nothing but a reallocation of resources and it always has been, and it is the price you pay for living in a society, and it is worth it, you'd rather have the addicted and mentally ill outside of streets one day you might get stabbed by one of them.

Also it is not just about taxes, the gov need to take some drastic measures too.

> Taxes are nothing but a reallocation of resources

Only when they are used to pay for social programs. Not when they are used to pay things like infrastructure, defense, etc.

Infrastructure and defense are resources, it is something everyone benefits from.

Where I live has both way lower taxes than SF and also way fewer mentally ill homeless people outside on the streets that might stab me, so I have to figure that this isn't really working out.

Homeless people move from other states to California because it is easier to live as a homeless in the Cali weather.

So that's just fortunate for you. California has to solve its problems, it is the hand that it was dealt to them and they have to make the best out of it.

If it is not suitable for you to live there, it is fine.

According to the webpage for the gross receipts tax [1], "Gross receipts include but is not limited to all amounts that constitute gross income for federal income tax purposes."

Looks like PayPal's gross income was around 3x their net income for 2021: 12.1 billion [2]

1: https://sftreasurer.org/business/taxes-fees/gross-receipts-t...

2: https://www.wsj.com/market-data/quotes/PYPL/financials/annua...

PayPals taxable income was $25 billion, so I went with the higher number (25 billion vs 12 billion) to establish an upper bound.

For a more salient point of comparison, PayPal is complaining about paying $0.01 for every $100 of revenue.

I guess they don’t get enough value from the city to choose to stay. They aren’t “complaining” they are moving to a place with more advantageous taxes. Seems rational.

> tax would be effectively based on payment volume, rather than profit

Playing SimCity as a young kid taught me that raising taxes too much means people and businesses leave. Maybe the SF lawmakers did not play SimCity growing up.

Maybe they want people to leave?

Maybe it's Maybelline :)

Reverting gentrification is a valid goal.

SF Lawmakers were too busy playing AI vs AI and then complaining about the results.

Maybe governance simulation can be worked into some standardized test for basic competence for lawmakers. Or is that not democratic?

> Maybe governance simulation can be worked into some standardized test for basic competence for lawmakers. Or is that not democratic?

It would be profoundly anti-democratic. Just, as a thought experiment, imagine if the game was "Socialist Utopia: Central Planning Works." A requirement like you propose would amount to a program of ideological indoctrination, either deliberate or inadvertent.

The gross receipts tax policy is from Proposition C. So decided by SF residents, not legislators.

https://www.vox.com/2018/11/7/18065086/san-francisco-prop-c-...

If you say to residents, ‘tax the rich’ without providing much background, of course you’ll get their vote. Legislators are responsible for making the messaging clear and fair.

At the same time, the voting public should also be smarter than this

That would be nice but it never works out that way.

Those who are not smart enough to see it -- ought to face the consequences.

Besides, the same voters elect the legislators, so the blame is totally on voters.

> you say to residents, ‘tax the rich’ without providing much background, of course you’ll get their vote

This shifts too much responsibility off voters. Not every voting population is so predictably simple.

It would be a good study to see how informed the average voter is especially when it comes down to local elections and not national.

> would be a good study to see how informed the average voter is

Genuine question: how would you measure this?

> Playing SimCity as a young kid taught me that raising taxes too much means people and businesses leave. Maybe the SF lawmakers did not play SimCity growing up.

That may be so, but SimCity didn't teach you about the real world, it taught you about SimCity. The simplified worlds of simulations often have ideological assumptions baked in, either deliberately or inadvertently.

Are you suggesting that no part of SimCity is based on “the real world”?

See also https://news.ycombinator.com/item?id=31531997 currently front page on HN

I'm saying SimCity isn't the real world, it's DOS-based entertainment. So you can't jump from "SimCity behaves thusly" to "the world behaves thusly."

How do you explain the influx of businesses to places like Austin? It has nothing to do with taxes?

Low land price is one. Moving businesses isn't free or cheap. These companies are gonna struggle once Texas goes full fascist.

How many parents want to raise their kids in Texas now? What if your kid is LGBT?

Anyway, good luck to companies moving into Texas. Market short term planning do be showing its face.

> How do you explain the influx of businesses to places like Austin? It has nothing to do with taxes?

Dude, SimCity isn't the real world, and cherry-picking some correspondence doesn't change that. Even a stopped clock will sometimes give you the right time.

> I'm saying SimCity isn't the real world, it's DOS-based entertainment

So by that logic everything is worthless because nothing is the real world. Good luck working with that mindset.

It’s not even remotely close to what he said.

The models in games are usually optimised for entertainment rather than predictive accuracy.

SimCity definitely reflects the values of its creators. After being brainwashed by SimCity as a kid it took me a while to realize that things like for example zoning are not some law of nature governing how cities are organized and the real world is infinitely more varied.

Except it got this part right..

> SimCity didn't teach you about the real world,

It's not because you use simple models for reality that the models are wrong. They may be wrong in extreme circumstances but still generally true - like all models.

It completely ignores that tax rates do not exist in a void. Rather, states are in tax competition against each other, so it's not about absolute tax rates but relative tax rates.

I think that was a reflection of the game developer’s political views and the gameplay they strove to author.

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