New Report: San Francisco Dramatically Tops Peer Cities in Business Tax Burdens, Hindering Economic Recovery and Job Growth

Comparative analysis of major U.S. cities shows San Francisco businesses face far higher tax costs than competitors such as Austin, Miami, Raleigh, Boston, Denver, and Seattle

The Bay Area Council Economic Institute today (May 6, 2026) released a major new report, The Cost of Doing Business: How San Francisco’s Tax Structure Constrains Economic Growth, finding that San Francisco’s business tax structure imposes substantially higher costs on employers than competing U.S. cities and is contributing to the city’s slower economic recovery, weaker job growth, and continued downtown challenges.

The report compares San Francisco’s tax structure and economic performance against peer cities including Austin, Boston, Denver, Miami, Nashville, Raleigh, Portland, Pittsburgh, and Seattle. The analysis concludes that San Francisco remains an outlier nationally in the tax burden it places on employers, particularly for office-based, technology, financial services, and retail companies.

“San Francisco continues to offer extraordinary advantages in talent, innovation, and global connectivity, but this report makes clear that the city’s tax structure has become a growing competitive disadvantage,” said Jeff Bellisario, Executive Director of the Bay Area Council Economic Institute. “Other knowledge-economy cities facing many of the same post-pandemic challenges have recovered more successfully than San Francisco,” Bellisario added. “This report shows that tax competitiveness matters, particularly in industries where companies can increasingly deploy talent and investment across multiple regions.”

Among the report’s key findings:

• San Francisco payroll employment remains approximately 8.6% below pre-pandemic levels, while many peer cities have fully recovered or significantly surpassed their February 2020 employment levels.
• Downtown weekday foot traffic remains at roughly half of 2019 levels, reflecting continued weakness in office activity and commuter presence.
• Sales tax revenues in downtown San Francisco remain approximately one-third below pre-pandemic averages.
• Net new business formation in San Francisco’s downtown office sectors has fallen by more than 95% since 2017.
• At approximately 33%, San Francisco now has the highest office vacancy rate among major peer cities analyzed in the study.

The report also modeled hypothetical tax liabilities for four representative companies operating in industries critical to San Francisco’s economy. In every scenario analyzed, San Francisco imposed significantly higher business tax liabilities than competing cities.

For example:

• A hypothetical cloud storage company would pay approximately $24.2 million annually in San Francisco business taxes — more than three times the liability it would face in Seattle and dramatically more than cities such as Austin, Boston, Raleigh, or Miami.
• A hypothetical payment processing company would face approximately $60.5 million in annual business taxes in San Francisco, compared to approximately $5.1 million in Seattle and far lower amounts in other peer cities.
• A hypothetical national retailer would pay more business taxes in San Francisco than in any other city included in the analysis.

The report argues that while remote work and broader tech sector changes have affected many cities, San Francisco’s uniquely high business tax burdens have amplified those pressures and influenced company decisions regarding hiring, expansion, and office location strategies.

“At a time when companies have more flexibility than ever in where they locate jobs and investment, San Francisco’s costs are increasingly outweighing its advantages.”

The report also examines examples from states and countries that paired lower business tax burdens with economic expansion and stronger fiscal performance, including North Carolina, Indiana, Tennessee, Canada, and Ireland.

The Bay Area Council Economic Institute emphasized that the findings are intended to contribute to ongoing discussions about San Francisco’s economic future and the role tax policy can play in supporting long-term growth, downtown recovery, and fiscal stability.