Since most venture-backed start-ups lose money, they pay little state and federal income tax. San Francisco taxes payroll expense, which is independent of opera

Since most venture-backed start-ups lose money, they pay little state and federal income tax. San Francisco taxes payroll expense, which is independent of operating profit and can easily become a burden especially since most web businesses have little capital costs and the largest business expense is employee salaries. My 20 person company is financed through cash flow. We pay around $1.5 million in payroll each year and our after-tax profits are around 8% of revenue. San Francisco's payroll tax reduces our after-tax profits to around 6%, which is equivalent to the city charging a 20% income tax on top of the existing Federal and State taxes. This brings our total tax burden to well over 50%.