then they'll reap what they sow as the big startups leave for palo alto

Big startups don't move to Palo Alto as there is not enough office space. They might move to Brisbane, though.

Speaking of which I thought I read an article recently about the city of SF attempting to negotiate with Twitter to get them to stay in town. If SF is trying to encourage tech startups to stay, this tax seems more than a bit counterproductive to the cause.

The linked article discusses these negotiations at length.