San Francisco voters approved several tax measures targeting big businesses and property owners in an effort to address economic disparity exacerbated by the coronavirus pandemic.
More than 65% of voters approved placing a new additional tax on San Francisco businesses that report CEO compensation that is more than 100 times the median compensation paid to employees.?? Gap, for example, is headquartered in San Francisco and pays its CEO more than 1,000 times the median employee salary.?? Other companies headquartered in San Francisco include Square, Twitter, and Levi Strauss Co.
The tax rate will be between 0.1% and 0.6% of gross receipts or between 0.4% and 2.4% of payroll expense for those businesses, giving the city an estimated $60 million to $140 million a year.
Higher Business, Property Taxes for the Wealthy
In addition, more than 68% of voters agreed to a business tax overhaul that will lead to a higher tax rate for many tech companies, and nearly 58% of voters supported a higher real estate transfer tax on property sales worth at least $10 million. The business tax overhaul is expected to generate annual revenue of $97 million for San Francisco, while the increased property transfer tax is estimated to generate $196 million a year.
San Francisco was home to 77 billionaires in 2019, making it the home to the third-largest billionaire population in the world, according to a June report from Wealth-X.?? Former Uber CEO Travis Kalanick, Salesforce CEO Marc Benioff, and Facebook co-founder Dustin Moskovitz all reside in San Francisco.
San Francisco has the fourth-highest business taxes of any city in the U.S. after New York, Washington, D.C., and Philadelphia, according to SPUR, the San Francisco Bay Area Planning and Urban Research Association.?? Its business taxes are much higher, on average, than other Bay Area jurisdictions, though its property tax is lower than the average for its neighbors.
Critics called the CEO compensation surcharge an attempt at redistribution of wealth and criticized raising business taxes in the middle of a recession, the Associated Press reported.??
“The middle of a pandemic-fueled shutdown is the wrong time to raise taxes,” Jim Wunderman, CEO of the Bay Area Council, said in a statement. “The drip, drip, drip of new general taxes is going to erode the already shaky foundations of local economies decimated by the worst downturn in generations.”
However, Supervisor Matt Haney, author of the measure titled the “Overpaid Executive Tax”, dismissed fears that the surcharge will drive companies out of San Francisco, noting that the tax is moderate compared to the cost of moving a business. He said he hopes the tax will encourage companies to reexamine their compensation structure.
The results “show that San Franciscans are concerned about growing economic inequality,” Haney said.