This week, residents of San Francisco voted by an overwhelming margin to approve several tax measures that target big businesses and CEOs. Under the new law, any company whose top executive earns 100 times more than their average worker will pay an extra 0.1% surcharge on its annual business tax payment, according to the Associated Press.
Additionally, if a CEO makes 200 times more than the average employee, the surcharge increases to 0.2%, and the amount increases with the gap between the CEO and the average employee. So if a CEO is making 300 times what an average worker does, they will see a tax surcharge of 0.3%.
The city’s voters also agreed to a higher tax rate for tech companies, and companies that have sales of over $10 million.
“We’re not gonna shed any tears if penthouse dwellers have to cough up,” the San Francisco League of Pissed Off Voters wrote in its voter guide.
City Supervisor Matt Haney, the author of the measure titled the “Overpaid Executive Tax,″ said that this week’s vote shows that residents of the city are seeking solutions to growing inequality.
“The very wealthy are gaining more and more. They’ve gotten much richer during the pandemic, while everyone else has remained stagnant. We need the wealth that has been generated in the city to be shared more broadly with workers and residents,” he said.
Haney said that he hopes to see most of this money directed towards health services, and estimates that the new taxes will collect $60 million to $140 million each year.
However, business advocates are concerned that raising taxes during an economic downturn could cause trouble for local economies.
Jim Wunderman, president, and CEO of the business advocacy group Bay Area Council said that a pandemic is not the correct time to implement such measures.
“The middle of a pandemic-fueled shutdown is the wrong time to raise taxes. 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,” Wunderman said.
Despite opposing the measure, Wunderman’s group did not fund the opposition campaign, and he later told Mercury News that “It was the right time and the right city, with a very big turnout.”
However, many supporters of the new measures say that income inequality has drastically increased during the pandemic, with tech executives making record profits while unemployment is at an all-time high. San Francisco is home to some of the most wealthy corporations in the world, and their mere existence in the city has made the cost of living impossible for many residents to manage.
The following news reports are from earlier this year, when these new measures were first announced.
Part of the money for San Francisco's proposed free universal mental health care program would come from an “excessive CEO salary tax" of .1% charged to companies where the CEO makes more than 100 times the average worker. https://t.co/auWfxoXdBQ pic.twitter.com/ooiKz6T83g
— NBC Bay Area (@nbcbayarea) May 29, 2019
San Francisco is proposing an "Excessive CEO Salary Tax" that could raise up to $140M/year, funding that will go to a universal mental health program. But will the tax work? CNBC's @robtfrank has the report: pic.twitter.com/u4HOQgvUtg
— Squawk Box (@SquawkCNBC) July 15, 2019
In 2018, similar measures were implemented in Portland, Oregon, which was the first US city to tax some of its companies based on the pay gap between the CEO and the average worker. However, Portland’s tax measure only applies to publicly held companies because the city relies on SEC data, while San Francisco was able to target both private and public companies because the businesses are forced to release their payroll information to the city.