How Twitter Extorted a Desperate City

Twitter, the lavishly funded microblogging service, is bullying its hometown of San Francisco into $22 million in tax breaks even as the city cuts health, police, transit and virtually all other city services. So much for Twitter's bleeding heart pretensions.

In the first of two votes, San Francisco supervisors approved 8-3 the creation of a special tax zone that will exempt Twitter from payroll taxes on new employees for six years. Twitter, which is publicly threatening to move to the dreadful suburb of Brisbane, wanted even more: total exemption from payroll taxes for eight years.

As Twitter's defenders themselves point out, this is being done largely to ensure outsized returns for Twitter's investors—they've showered the company with $350 million, or $1 million per employee, and Twitter has a "fiduciary interest" in meeting their outsized expectations, social consequences be damned. The tax is also being touted as a way to make sure Twitter's staff get super fabulously wealthy on their employee stock rather than merely fabulously wealthy, since the payroll tax would shave a bit off their IPO windfalls.

Large corporations ask for tax breaks like this all the time. Wal-Mart, for example, takes so many state and local subsidies for development of stores and administrative offices that there's an entire website devoted to tracking them.

The difference with Twitter is its relentless posturing as a different, better sort of company. "Young companies like ours are particularly well positioned to build altruism into the corporate culture from an early stage," co-founder Biz Stone wrote on the company blog just last year in a note about donating to education. In The Atlantic, Stone touted the fact that Twitter was suggested for a Nobel Peace Prize by a former national security adviser. And on its "Hope 140" philanthropic bragging site, the company wrote, "At Twitter, one thing that drives us is our desire to make a lasting impact as a company. Being a force for good is at the heart of that mission."

How Twitter Extorted a Desperate City

If Twitter wants to be a "force for good" in areas like literacy and disease prevention—both touted as "Causes We Support" on Hope 140—it can start by paying its hometown taxes in full, just like loads of less fortunate small businesses do. Not only is San Francisco's payroll tax less than half the rate of the personal income tax in fast-growing tech hotbed New York City, but San Francisco, like many other municipalities these days, is desperate for the cash. Despite deep cuts in prior years, it's facing a deficit of close to $380 million this year. The city faces the prospect of "more catastrophic cuts—rather than cutting to the bone we will likely have to actually cut the bone of city sevices," says Board of Supervisors president David Chiu, who has become the chief backer of Twitter's tax break in the desperate wake of the company's threats. Chiu hopes winning tax extensions in a June special election will ease the pain, but budget shortfalls are already felt in the police department, health services and transit, which all now face steeper cuts.

Twitter's $22 million break is also just the first domino; since the special neighborhood zone it will relocate to as a condition of the deal is geographic rather than particular to the company, other big taxpayers like Yelp or Zynga may be able to get similar breaks—or convince the city to extend corporate welfare to other neighborhoods.

How Twitter Extorted a Desperate City

Of course, with passage of its tax break already halfway done, there is little chance Twitter will simply walk away from the big gift painfully tendered by San Francisco's taxpayers. After all, any company able to chisel a $3.7 billion valuation out of hardened Silicon Valley venture capitalists despite having no real business plan is bound to be, at core, a thoroughly savvy red-blooded hustler of the capitalist system. What's surprising is that Twitter ever pretended to be anything different, and that so many users, bleeding heart Hollywood celebrities first among them, continue to put the company on a sort of pedestal. It must be that cute bird.

Photos: San Francisco (Shutterstock.com); flag at Twitter headquarters (Scott Beale/Flickr); Twitter co-founder Biz Stone (Getty Images)