San Francisco voters approve taxes on highly paid CEOs, big businesses

San Francisco's solution to everything seems to be to just keep raising taxes, and throwing money at things which don't work. At some point you have to realize that more money isn't always the solution, you actually have to fix your beurocracy. It's insane to me that the city with so many rich people and incredibly valuable companies is such a mess, your telling me that a small city with an incredibly wealthy population can't figure out how to keep the tenderloin from being full of tents and open drug use? Or get some form of functioning public transit? Pretty pathetic.

Sounds like business will be booming for temp agencies as well as janitorial and facilities maintenance contractors.<p>Whatever the net positive here is wholly negated by the number of stable long term jobs that are going to go away and be replaced by whoever the body shop chooses to send that day. Working for these middle men really sucks compared to working for whoever the service is being provided for (and I say that from experience).

It will work out well fiscally because giant companies will suck it up and pay, but it looks like a bad strategy from a forward-looking point of view.<p>You want to incentivize future growth too, and you want to make sure that 20 years down the line, you have the new FAANGs of the world giving you millions in tax dollars, because history has shown that the largest of companies can eventually die out, and tech is full of graveyards.<p>What this does is, it collects money from today&#x27;s FAANGs while disincentivizing future startups from starting here.<p>This is akin to the boiling frog fable (yes I know it&#x27;s fake but the point of the fable stands), except the city is the one putting itself in the cauldron and raising the temperature by chipping away bit by bit the things that make the bay area a good place to live and invest in.

This raises some interesting questions &#x2F; side effects:<p>1) Companies may now have a direct incentive to have their lowest income earners be outsourced&#x2F;contracted out to boost the median pay amount.<p>2) It was smart of them to include compensation such as stock options. However if a city starts to expect this income, it will all go away in recessions when CEO&#x27;s stock options are not valuable. ie more money to the city in boom periods and not much in bust cycles.

San Francisco is the 16th largest city by population and has a budget of around 14 billion which is like 6 or 7 times larger than many cities with much bigger population. This is just a badly run city and throwing more money at their problems isn&#x27;t going to help them.

From: <a href="https:&#x2F;&#x2F;calmatters.org&#x2F;california-divide&#x2F;2020&#x2F;11&#x2F;san-francisco-ceo-tax-income-gap&#x2F;" rel="nofollow">https:&#x2F;&#x2F;calmatters.org&#x2F;california-divide&#x2F;2020&#x2F;11&#x2F;san-francis...</a><p>&gt; The tax will levy an extra 0.1% to 0.6% on gross receipts made in San Francisco for companies whose highest paid executive makes 100 times or more its median worker’s salary. The amount levied will increase in 0.1% brackets proportionally to the pay ratio. A company whose highest paid employee earns 200 times more than its median San Francisco worker will get a extra 0.2% charge on its gross receipts. For companies whose CEO makes 300 more, the charge jumps to 0.3% and son on. The tax caps at 0.6%, and only companies with gross receipts over $1.17 million will be targeted.<p>&gt; Under the measure, gross receipts and CEO compensation will include money made from stock options, bonuses, tax refunds, and property, a caveat seen by many as a way to target the tech sector where CEOs are often compensated in non-salaried bonuses. Tech is expected to account for 17% of the tax revenues, according to an estimate by the city’s chief economist, while retail and financial firms are expected to account for 23% of the revenues each.<p>&gt; The CEO tax is expected to generate between $60 million to $140 million per year.<p>Doesn&#x27;t seem that big in comparison to what SF annual budget is.<p>From (because the article doesn&#x27;t give exact figures on transfer taxes): <a href="https:&#x2F;&#x2F;sfcontroller.org&#x2F;sites&#x2F;default&#x2F;files&#x2F;Documents&#x2F;Economic%20Analysis&#x2F;200654_economic%20impact_final.pdf" rel="nofollow">https:&#x2F;&#x2F;sfcontroller.org&#x2F;sites&#x2F;default&#x2F;files&#x2F;Documents&#x2F;Econo...</a> ?<p>&gt; Proposed legislation would raise the Transfer Tax rate on properties in the city that sell for more than $10 million. For properties selling for between $10 million and $25 million, the rate would rise from 2.75% to 5.5%. For properties selling for over $25 million, the rate would rise from 3% to 6%.

To everyone saying, &quot;this will kill low wage jobs&quot;, most companies already outsource their low wage jobs. Their janitors and cooks and maintenance people are already via contractors. Their lowest paid employees are most likely their admin assistants at $50K a year.<p>So basically this is targeting companies whose CEOs make over $50M a year, which is basically Twitter, Pinterest, Google, Facebook, Uber and a few others that actually have an office in San Francisco.<p>And I&#x27;m sure Google and Facebook et. al will fight them over how much money they &quot;make&quot; in San Francisco.

Brings to mind the last paragraph here (see my comment below for the ending):<p>&gt; By the time of Plato’s death (347 B.C.) his hostile analysis of Athenian democracy was approaching apparent confirmation by history. Athens recovered wealth, but this was now commercial rather than landed wealth; industrialists, merchants, and bankers were at the top of the reshuffled heap. The change produced a feverish struggle for money, a pleonexia, as the Greeks called it—an appetite for more and more.<p>&gt; The nouveaux riches (neoplutoi) built gaudy mansions, bedecked their women with costly robes and jewelry, spoiled them with dozens of servants, rivaled one another in the feasts with which they regaled their guests. The gap between the rich and the poor widened; Athens was divided, as Plato put it, into “two cities:… one the city of the poor, the other of the rich, the one at war with the other. The poor schemed to despoil the rich by legislation, taxation, and revolution; the rich organized themselves for protection against the poor. The members of some oligarchic organizations, says Aristotle, took a solemn oath: “I will be an adversary of the people” (i.e., the commonalty), “and in the Council I will do it all the evil that I can.&quot;<p>&gt; &quot;The rich have become so unsocial,” wrote Isocrates about 366 B.C., “that those who own property had rather throw their possessions into the sea than lend aid to the needy, while those who are in poorer circumstances would less gladly find a treasure than seize the possessions of the rich.”<p>&gt; The poorer citizens captured control of the Assembly, and began to vote the money of the rich into the coffers of the state, for redistribution among the people through governmental enterprises and subsidies. The politicians strained their ingenuity to discover new sources of public revenue. In some cities the decentralizing of wealth was more direct: the debtors in Mytilene massacred their creditors en masse; the democrats of Argos fell upon the rich, killed hundreds of them, and confiscated their property. The moneyed families of otherwise hostile Greek states leagued themselves secretly for mutual aid against popular revolts.<p>[1] Will Durant. “The Lessons of History.” p. 58-60

This design seems really odd. Why target business and CEOs in particular? Why not just have a straightforward high progressive tax? It also seems like it will reward the practice of outsourcing lower-paid job functions, or discourage employers from hiring lower-paid workers generally. The whole thing seems designed as a punitive measure, without really thinking about what incentives it creates.

Feels like a great way to encourage companies to leave the state.<p>I left California many years ago. Every single part of my life is much better. Fiscally , romantically, mentally. SF over values how essential location is. With Covid it&#x27;s clear remote work is the future, base the company out of Delaware and go full remote

<i>&quot;Critics call the surcharge a blatant attempt at redistribution of wealth...&quot;</i><p>Um, yes? &quot;Critics call John Travolta &#x27;blatantly an actor, playing parts in movies.&#x27;&quot;

Having the pay ratio be relative to the &quot;Median San Francisco worker&quot; might have some interesting effects - for financial&#x2F;tech firms who want to avoid the tax they might just shift their ~25% lowest paid workers to an office in Oakland (though any corps with a mandatory physical presence like retail won&#x27;t be able to do this).

City that depends on high paid tech workers to pay for their inefficient public sector approves law to encourage those tech workers to leave...

Does anyone have the text of the law, or a detailed description of it?<p>&gt; <i>Under a newly approved law, any company whose top executive earns 100 times more than its average worker will pay an extra 0.1% surcharge on its annual business-tax payment. If a CEO makes 200 times more than the average employee, the surcharge increases to 0.2%, and so on per multiple of 100.</i><p>What do they mean by &quot;earns,&quot; are bonuses included? Nonmonetary compensation like having your car or mortgage paid for directly? Increase in stock value that&#x27;s part of your comp package?<p>I&#x27;m sure folks will try to game this to get around it, I&#x27;m just curious how.<p>Also it sounds like this is a surcharge on <i>taxes paid</i>, not actually a new tax on revenue. So if you pay $1 million to the city of San Francisco in taxes, and your CEO earns exactly 100x more than the average worker, you now have to pay... $1,001,000?

&gt; He dismisses fears that the surcharge will drive companies out of the city, saying the tax is modest in comparison to the cost of moving a business.<p>Perhaps - but it will discourage new businesses from locating there, and new businesses are the future.

I&#x27;m sure companies will find a way to avoid the tax. Splitting the company (low income workers are already rarely employed directly), finding compensation forms that don&#x27;t count,...<p>The real estate transfer tax sounds rather misguided as well. I expect it to distort the already unhealthy real estate market in harmful ways.<p>I&#x27;d rather go for higher ground value taxes with reductions for high density occupancy or people who live in that building themselves.

&gt; hopes the tax will drive companies to reexamine their compensation structures<p>Outsource the lowest paid workers to a subcontractor to raise your average employee wage. I’m not sure that has a desirable effect, but it seems this law certainly financially encourages that.

&quot;The tax will levy an extra 0.1% to 0.6% on gross receipts made in San Francisco&quot;<p>What counts as &quot;made in San Francisco&quot;? It doesn&#x27;t seem like that definition would apply to online revenue for e.g. a SAAS company or social media site. It would still apply to some tech companies, those with a physical presence like Uber or AirBnb are more clear.<p>So is Salesforce in the clear for this tax, or perhaps they are only taxed on the revenue that comes from sales to other businesses who are themselves in SF? (And what if those businesses have multiple offices?). Seems quite complex and probably pretty easy to get out of with some accounting tricks. I guess this is a progressive SF law that really isn&#x27;t targeting tech companies, for once?<p>On the other hand, it clearly will apply to every national chain retail store, restaurant, etc. And if so, all of their local mom-and-pop competitors will get a slight leg up from this in addition to raising the revenue from the tax. If I&#x27;m understanding this right I guess it might not be the worse idea.

Yeah, that won&#x27;t have any unexpected effects. U-Haul is 20x what it was 20 years ago. How much higher can it go.

Why do these discussions always revolve around the collection of taxes instead of how the taxes will be used? Would anyone be complaining if they knew the taxes would be more beneficial? Conversely, wouldn&#x27;t we reject these new taxes if we knew they weren&#x27;t going to be a greater benefit? Does anyone even know how the taxes will be used?

Some of these city measures are carefully created to funnel money into the general fund. Our Prop I says it’s for something, but the board of supervisor who’s pushing the idea admitted there’s no guarantee the funds will go to what it was put on the ballot for. The money from Prop I will go into the general fund. Why is this important? The city has a huge pension liability they’re not able to renegotiate and keep from obligations to keep paying it. The city’s budget for next year is somewhere near $13b. Yes billion. For a city of 800k, our budget is $13b.

I doubt it has the intended effect as SF tech companies are already moving to distributed locations. Workers have had the past 8 months to enjoy avoiding long commutes and stepping over needles and feces.

The cynical side of me thinks that exec pay packages will just change to workaround this tax.<p>For example, an exec&#x27;s pay will be capped at 100x median worker salary, but just spread out across multiple years. As others have mentioned, temp agencies&#x2F;contractors will also probably be utilized.

This is a strange bill. It targets companies based on the delta between CEO compensation and median worker.<p>This means companies that have larger workforces - mostly determined by industry - are less likely to set up shop in San Francisco. Of those that do, they are strongly incentivized to use contractors instead of employees to ensure the salary gap is within reason.<p>In other words this just created an arbitrary set of incentives for companies to adjust their behavior, likely to the detriment of non-high income workers in the city.

With policies like this, why would anyone in their right mind (I say this as a staunch progressive) start a business in SF or even consider traveling to the Bay Area for the benefits of huge equity packages? Even if you choose to willingly ignore that CA state taxes are also increasing substantially.<p>I hate to say it, but when you do things like this to Big Business TM it DOES have trickle down effects that negatively affect small business owners and business services alike.

I actually think things like this might be really good for the business culture of San Francisco.<p>For a while, SF was a popular place to start a new company, but all established CA tech firms were down on the peninsula or in the south bay.<p>Some of those startups got big, and some of the big firms opened SF offices to compete for talent.<p>Now, it&#x27;s hard to compete for talent in SF if you&#x27;re starting out - you have to compete with the Ubers and Airbnb&#x27;s as well as Google and FB.<p>Taxes like this will push more of &quot;big tech&quot; out of the city (eg Stripe moving to South San Francisco) and free up more breathing room for young startups.<p>I guess I take it as a given that this is better for SF, but others may disagree or need convincing.

This is a terrible law. How exactly do you measure the compensation of the CEO of Ikea (moving into SF soon at 6th and Market), Adidas, DJI, Atlassian, Spotify etc? Exchange rates fluctuate a lot and stock based compensation is tricky.

For people who point out that this incentivizes companies to leave San Francisco, that&#x27;s probably not a coincidence. Many SF politicians see tech as the enemy and would be happy to see companies go elsewhere.

The financial success of San Francisco has covered for a lot of bad policies. I feel like the tech boom is somewhat like a &quot;resource curse&quot;. Obviously tech has a lot more positive economic development associated with it, but a lot of it can just pick up and move to the peninsula or south bay.<p>It seems like a potentially bad mix where a lot of people live in SF just for the money, and as soon as a downturn hits amd the bad policies start to have consequences it will just hollow out. That may be happening now.

What a massive incentive for companies to not classify people who do their work as employees. You don&#x27;t have to pay extra CEO taxes, and you don&#x27;t have to provide benefits!

This raises some interesting questions &#x2F; side effects:<p>1) Companies may now have a direct incentive to have their lowest income earners be outsourced&#x2F;contracted out to boost the median pay amount.<p>2) It was smart of them to include compensation such as stock options. However if a city starts to expect this income, it will all go away in recessions when CEO&#x27;s stock options are not valuable. ie more money to the city in boom periods and not much in bust cycles.

The politicians have shown their hand by not designing this legislation to instead have companies pay their employees more. Why do I say that? It&#x27;s currently cheaper to pay the tax than give the raises to your employees. So politicians have shown it&#x27;s just a money grab _For the Government_ more than for the employees.<p>Let&#x27;s say I make $100 and the mean is $1. I&#x27;ll pay 0.1% on tax payments.

SF and Cali in general just love to chase businesses out of their state.

This is where I&#x27;m legitimately confused: the city is an expensive city, land prices are high and housing is expensive, rent is high and so forth. We&#x27;re told that that is the major problem, and the major reason for the homelessness issue of SF (mentioned many times below in this thread by numerous commenters).<p>But other cities have lower land prices and cheaper housing. San Francisco has the highest land and rent prices of the entire country. The argument that &quot;we need to lower the price of housing to address the homeless problem&quot; sounds very appealing, until you consider: wait, why are they going there? The indications are that they&#x27;re not from there.<p>Is the problem that they&#x27;re coming from places that don&#x27;t have social programs, and drug legalization, which SF kind of has? There are needle exchange programs and if you start to convulse in the street someone will run over right away and give you Narcan. There&#x27;s free food. Showers and bathrooms are ... apparently a problem ... but it&#x27;s warm out. It&#x27;s not Chicago in winter.<p>So maybe it just make sense for homeless to hang out in Tenderloin. As in, if a magic wand made us homeless, we&#x27;d just logically go there because it&#x27;d be good and healthy for us to do that.<p>Going back to the article. Someone mentioned the Laffer Curve: if you tax the rich to get revenue, they&#x27;ll leave and you&#x27;ll get less revenue. Well maybe there&#x27;s another curve: if you make it extremely comfortable and desirable for homeless people in order to solve the homeless problem, you&#x27;ll have a bigger and bigger homeless problem?<p>Maybe the problem isn&#x27;t &quot;high land prices&quot; in San Francisco. Or even, &quot;inequality.&quot; Maybe the issue is that the rest of the state &#x2F; country don&#x27;t have the same degree and quality of social programs and drug legalization as SF, and so SF is a natural place to go.

Barring federal help, it&#x27;s possible, or even likely, that we will see greater taxation in many local jurisdictions (cities, counties, states) in coming months, because they are close to running out of cash as a result of the pandemic&#x27;s impact on tax collections.<p>The Wall Street Journal recently published a good summary of the potential cash crisis at <a href="https:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;u-s-states-face-biggest-cash-crisis-since-the-great-depression-11603910750" rel="nofollow">https:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;u-s-states-face-biggest-cash-cr...</a><p>Quoting from the article:<p><i>&quot;US States Face Biggest Cash Crisis Since the Great Depression: The drop in tax revenue has led to a total shortfall expected in the hundreds of billions of dollars—greater than 2019’s K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure.&quot;</i>

This appears to just target salaries, not SBC. [1] Considering how large a role SBC plays in executive comp, it seems like this law will not be as impactful as if it looked at total comp. Am I reading this incorrectly?<p>I would note that it would be difficult to assess the FMV of different SBC for the purposes of these calculations. For example, engineers might get RSUs, and the CEO might get options with a particular strike price, or different amounts of RSUs based on hitting revenue&#x2F;profitability targets. It wouldn&#x27;t be simple to value each of these things a priori, and companies wouldn&#x27;t just accept whatever value the SF govt employees come up if it means huge amounts of additional tax.<p>1: <a href="https:&#x2F;&#x2F;ballotpedia.org&#x2F;San_Francisco,_California,_Proposition_L,_Business_Tax_(November_2020)" rel="nofollow">https:&#x2F;&#x2F;ballotpedia.org&#x2F;San_Francisco,_California,_Propositi...</a>

Several of the comments here entertain the idea you can get wealthy in the Bay Area working working for an established company, not equity. I have never understood the math.<p>Let’s say you earn an outrageous salary working for a FAANG of about $450,000. That is about 3x the equivalent where I live for the same work but taxes are substantially higher and housing costs 6-10x. Numerically it doesn’t make any sense when the current value of my house (after doubling in value) is barely the downpayment of a house in the valley. Apartments are also ridiculously expensive and I would want to live in a tiny apartment with kids (my own, not roommates).<p>Then the other argument is that the valley is where the jobs are. My experience is that if you are an experienced and half competent software engineer there are plenty of jobs in every major metro.<p>So if I already have a high paying job and own real estate what is the pull to move to the Bay Area?

&#x27;Which companies&#x27; does this rule apply to? Companies that have HQ in SF? That&#x27;s rather an easy thing to change, no? &#x27;Majority of Employees&#x27;?<p>What if the CEO has &#x27;an office&#x27; in South Bay but spends their time in the city?<p>This seems like the wrong tranche of government to be flirting with such a law.

The fundamental problem is California is Prop 13. They can try to patch it up however they want these one off measures, but until you address the massive amount of wealth extraction going on by the landed class, all these attempts for improvements will just flow right into land. This principle was discovered 200 years ago:<p>&gt; When there is no accessible rent-free land, any improvements in the condition of society, be they in the form of civilizational progress or local improvement, are recaptured in the form of higher land values, and the leftover wages after rent is paid will tend towards subsistence, as described by David Ricardo&#x27;s Law of Rent.<p>From <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Rack-rent" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Rack-rent</a>

Imagine being so incompetent that you think the solution to San Francisco&#x27;s problems is a property <i>transfer</i> tax. Not a property tax. A transfer tax.<p>Transfer taxes disincentivize transfers. What do we need more of in property constrained places like SF? Transfers.<p>What a shockingly stupid policy.

SF has so much tax revenue, but where is it spent?

This is quite a small tax, even in the “worst” case (maxes out at 0.6%, if your top exec makes 600x the average employee). And it only impacts companies with massively overpaid executives - there’s no change for most companies, who have nowhere remotely close to a 100x discrepancy between top paid and average employees.<p>In reality, this will create a bit of extra tax revenue, and push down SF exec salaries ever so slightly. Both good things. No company is moving out of SF, replacing their staff with contractors, etc. over such a tiny tax. It’s a very small step in the right direction IMO.

San Franciso is a city, so I imagine what will happen is that companies will move out of the city limits and this new tax will be completely ineffective.<p>Seriously, how hard is it to find a new office in Oakland or San Jose?

What happens when other cities want to do the same thing to large companies with a national footprint? Is Sundar Pichai going to have to pay 0.6% to every city Google operates in who wants in on this?

I lived in SF from 2009 to 2019 and just moved out of the Bay Area entirely. SF is about to kill its golden goose. Tech companies don&#x27;t have to be in SF Bay Area anymore and now that there&#x27;s a mass exodus fleeing the area due to cost of living and quality of life, SF government is going to hit a massive budget crunch. It&#x27;ll be interesting to see how it plays out. Chesa Boudin and the rest of the ideological extremists who sabotaged the city will finally get what they wanted.

Text of the measure: <a href="https:&#x2F;&#x2F;sfelections.sfgov.org&#x2F;sites&#x2F;default&#x2F;files&#x2F;Documents&#x2F;candidates&#x2F;2020Nov&#x2F;200629_ExecutivePay_LT.pdf" rel="nofollow">https:&#x2F;&#x2F;sfelections.sfgov.org&#x2F;sites&#x2F;default&#x2F;files&#x2F;Documents&#x2F;...</a><p>Note that it&#x27;s &quot;highest paid managerial employee&quot; and not &quot;CEO&quot; or &quot;highest paid executive&quot;.

I continue to accumulate stocks in companies that jettison their W2&#x27;s for 1099 workers under the backdrop of &quot;Work from home.&quot;

Sigh... more ill-thought &quot;policies&quot; voted as propositions.<p>I wonder, when will the balance change such that it no longer makes sense for any relevant company to be based off of San Francisco.<p>I wonder, how many bad regulations does San Francisco have to come up with before it finds itself in Detroit&#x27;s shoes? It is harder for San Francisco, since the weather here is phenomenal, but not impossible.

I wonder how many low margin businesses will leave SF because of this. If I understand it right, this is up to a 0.6% tax on gross receipts. What if a business runs on very thin margins? I can imagine someone like Waste Management ($50b company, $11m in CEO comp, median employee probably makes waaaay less than that) deciding that operating in SF is no longer worth it.

One thing I don&#x27;t get - what&#x27;s the point of having an office in SF now? (Almost) nobody is going to the office anymore, everyone switching to remove. All meetings are online. The city itself is dirty and unsafe and smelly. And you&#x27;ve got insane prices and taxes. What&#x27;s the point of staying there? Is it just inertia? Is it too expensive to move?

A lot of people here misinterpreting the CEO tax —- it applies to revenue made within San Francisco, and is not dependent on the location of the company. So no, it should not impact the decision of a founder to base their company in SF.<p>The doubling of transfer tax on property over $10m however... that has a very real impact on a founder who has already made some money.

Remote work wasn&#x27;t as big of a thing when this was drafted, but it will be interesting to see how it plays out as SF-based tech workers relocate to lower cost of living parts of the country&#x2F;world.<p>Some companies have already said that they will reduce pay of employees who relocate, which affect the way that the average pay vs CEO pay shakes out.

I doubt the city will see a penny from this. There&#x27;s nothing in place to do an audit to figure out who should be taxed.

To those who say it will disincentivise companies from new companies being found in SF: Perhaps we are in a situation where CEOs expect to be paid 100 times more than the median pay but this should not be so. In what world is this uneven distribution fair? Legislation more frequently should be bold like this and aim to create a world that is better as opposed to being dictated by immediate side effects. Perhaps it will take a long time for this legislation to become nationwide and perhaps fewer startups will be created in SF, but someone should lead the way in trying to create a fairer world.<p>If companies wish to renumerate their CEOs more highly they should do so by also increasing the pay of the rest of their workers as this piece of legislation encourages. Sharing the benefits of good performance with the employees may have positive flow on effects as employees may feel rewarded for their positive work and consequently feel more motivated to continue working hard. Additionally it increases the sense of fairness and trust in the economic system and perhaps in society as well as more people that work hard reap the benefits of their work.<p>Overall this of legislation in my opinion is a good first step towards making employee owned businesses a more widely adopted model and creating a more equitable economic system.<p>EDIT: discouraging excessive payouts to CEOs, encourages directing that capital back into the company. Large corporate payouts do take away money that the company generated (not only the CEO) and I think this legislation recognises that CEOs also need to be held more accountable (in terms of renumeration) to the companies they lead as large renumeration is not always in the company&#x27;s best interest (even when performing well)

&gt; Under a newly approved law, any company whose top executive earns 100 times more than its average worker will pay an extra 0.1% surcharge on its annual business-tax payment.<p>This is a great way to incentivize CEOs to fire their lowest paid workers, outsource parts of the business that involve low-skilled labor.

There&#x27;s some thoughtful analysis of the proposition from SPUR: <a href="https:&#x2F;&#x2F;www.spur.org&#x2F;voter-guide&#x2F;san-francisco-2020-11&#x2F;prop-l-disproportionate-ceo-pay-tax" rel="nofollow">https:&#x2F;&#x2F;www.spur.org&#x2F;voter-guide&#x2F;san-francisco-2020-11&#x2F;prop-...</a>

Doesn&#x27;t this type of tax violate the Equal Protection Clause of the Fourteenth Amendment to The Constitution, <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Equal_Protection_Clause" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Equal_Protection_Clause</a>?

Is this just salary or total compensation? If it&#x27;s just salary then it&#x27;s easy enough to compensate the CEO in one of many other possible ways.<p>I wonder if the median CEO will start making more. The going rate will become 99x approximately the SF average salary of 98k, or just under 10mm.

How is it even working? How a city is going to tax a company registered in, say, Delaware? What if every municipality in the world decide to tax every company created everywhere?<p>The article mentions another city where it&#x27;s working - Portland, afair. How&#x27;s it possible?

If you want to read the actual text of the law, go here [0] and scroll down to the letter &quot;L&quot;.<p>[0] - <a href="https:&#x2F;&#x2F;sfelections.sfgov.org&#x2F;measures" rel="nofollow">https:&#x2F;&#x2F;sfelections.sfgov.org&#x2F;measures</a>

So lay off all non professional workers and replace them with temps and contractors?

Agree with it or not, at least this will add some data to the discussion. I have a feeling the result will be somewhere in the middle of the speculation and have both good and bad consequences that weren’t intended.

This is a small tax and should be considered a pilot program for an idea that&#x27;s been around a long time. Are all of the criticism on here valid? We&#x27;ll find out soon enough. Will a tax like this actually change behavior in desired ways, or provide a useful amount of revenue? We&#x27;ll find that out, too.<p>But what this tax will <i>not</i> do is change the very nature of San Francisco or dramatically alter its business environment. The tax is just too small for that to be the case. It&#x27;s a tiny addition to a vast and complex and ever-changing web of taxes and regulations that large businesses in SF have been successfully dealing with for generations.

&quot;Average worker&quot; sounds like such an easy metric to game. They just should have used &quot;lowest paid worker&quot;.

Based on the title I expected to be more offended. But it seems like a reasonable percentage to encourage wage equality.

&quot;dismisses fears that the surcharge will drive companies out of the city, saying the tax is modest in comparison to the cost of moving a business.&quot;<p>...until it&#x27;s not. Amazon has shown us there are lots of attractive jurisdictions ready to shower companies with tax incentives to relocate; SF feels like a city that&#x27;s enjoyed the benefits of many factors not directly of their making and they could be in for a strict reckoning. We will see...

CEO pays self $1 salary and a ton of stock options. CEO is now the lowest paid employee in the company. Problem solved.

&gt; Critics call the surcharge a blatant attempt at redistribution of wealth.<p>Said with zero irony, as if this is the worst thing ever.

How do they determine that, does the CEO has to be a SF resident or the company&#x27;s HQ has to be SF based?

<a href="https:&#x2F;&#x2F;archive.is&#x2F;GlkGc" rel="nofollow">https:&#x2F;&#x2F;archive.is&#x2F;GlkGc</a>

It pains me to see that well-meaning people fail to do a basic pass on 2nd order effects of this tax:<p>- Since &quot;high CEO pay&quot; is defined as 100x multiple of average pay, the first unintended incentive is for companies to cut back on hiring low-end labor, or 1099&#x2F;outsource so that they do not drag down the average pay. This directly harms the employment prospects of people at the bottom.<p>- If it succeeds in reducing CEO pay, it&#x27;s not clear that the money is redistributed to other employees, as opposed retained to by the company as capital, or returned to shareholders. And not that this matters much. Even if you were to redistribute, say Bobby Kottick&#x27;s $30M compensation, it would result in a net-gain of ~$270 per month per employee at Activision. That is assuming the CEO&#x27;s pay goes to ZERO. If this tax only results in a net -10% change in CEO pay, it&#x27;s actual economic benefit to other workers is a rounding error.<p>- This arbitrarily favors companies of certain structure vs others. For example, a VC firm or Law firm has an extremely high average pay, while any operation that likely involves &quot;real economy&quot; employs a legion of low-pay workers. The CEO of a large, meat-and-potatoes kind of operation is far more likely to be dinged by the 100x rule than the head of a high end professional partnership. Why are VC firms special in the eyes of this law?

This is such a smart thing to do in the middle of a pandemic that showed that distributed teams can work.

Every CEO will just move out of San Francisco city limits... This doesn&#x27;t really do anything.

Since this is transparently easy to game, i wonder which people is it supposed to be pandering to?

With the way tax brackets work couldn&#x27;t this result in a net loss of revenue for the city?

And where exactly these taxes will go? From pockets of CEOs to pockets of ... municipal bureaucrats, whose median salary floats at a humble mark of 175K&#x2F;year?<p><a href="https:&#x2F;&#x2F;www.city-journal.org&#x2F;san-franciscos-municipal-budget" rel="nofollow">https:&#x2F;&#x2F;www.city-journal.org&#x2F;san-franciscos-municipal-budget</a>

Otherwise known as the &quot;fire your lowest paid San Francisco employees&quot; bill.

&gt; on gross receipts made in San Francisco<p>How much does this really apply to SF tech companies?

A number of those taxed are just being incentivized to move elsewhere.

A great way to push companies out of your state.

That will get the human poop off the sidewalks.

&quot;saying the tax is modest in comparison to the cost of moving a business.&quot;<p>Basically admitting that the thought process is charging as much taxes as you can possible get away with.

I&#x27;m glad to see San Francisco is deciding which voluntary arrangements among private citizens should be penalized. Their governance has been consistently Solomonic.

Brilliant idea: introduce a city tax in the middle of a pandemic which makes everyone work remotely from anywhere they want. Couldn&#x27;t possibly backfire &#x2F;s.

I&#x27;d like to see Los Angeles do the same thing for highly compensated entertainers. If they make more than a multiple vs. average service worker, tax them.

In other news, highly paid CEOs and big businesses approve moves out of San Francisco.<p>Did you think it would end any other way?

Honestly this not a bad move. It incentivizes the right behavior and the extra levy isn’t ludicrous.<p>I am as libertarian as it comes but this looks like a proportionate response to pay disparity and a way to generate extra $$.<p>That being said I am skeptical of it being very successful in either of its goals.

There are multiple issues as play with plenty of guilty parties:<p>The city of SF: Its horribly run to put it mildly, it gets an absolute fortune from taxes and the money &quot;disappears&quot;. See the myriad homeless everywhere, think why doesn&#x27;t the city spend any money on fixing the problem? They do, they spend 300M dollars a year on the homeless [1]. Lets talk about their budget, 13.7B[2], yes that Billion for a city with 883k residents. Looking elsewhere in CA at San Diego with has 1.3M residents, it has a budget of 4.3B[3] and although there are homeless in SD its not an apocalyptic scene like SF is.<p>Tech Companies: Having a huge number of offices in SF with everyone making 2-4x what an average family makes in a year in the US is going to bring in some serious money. While its fine they make that much, what is not is having a extreme concentration of companies that can run their business anywhere in the US or World. With Covid we are seeing record numbers leaving the city as they are no longer shackled to the SF offices.<p>Residents: Alot of SF housing owners are extremely resistant to building(as more housing supply reduces their home value). There is a fierce nimby movement that would like nothing more but to halt all development in the city as it changes the &#x27;character&#x27; of the city[4].<p>Strict zoning&#x2F;environment laws: These laws are typically voted in by alot of residents but some have been around a long time and plague california stifling development and housing. A very long read article that goes into depth can be found here - <a href="https:&#x2F;&#x2F;techcrunch.com&#x2F;2014&#x2F;11&#x2F;02&#x2F;so-you-want-to-fix-the-housing-crisis&#x2F;" rel="nofollow">https:&#x2F;&#x2F;techcrunch.com&#x2F;2014&#x2F;11&#x2F;02&#x2F;so-you-want-to-fix-the-hou...</a><p>Summary: Add an incompetent local govt. mix in a huge influx of wealth and a splash of laws that stifle housing development in a city bound by 3 sides by water and you get the disaster that SF is.<p>[1] - <a href="https:&#x2F;&#x2F;townhall.com&#x2F;tipsheet&#x2F;timothymeads&#x2F;2019&#x2F;05&#x2F;18&#x2F;san-francisco-homeless-rises-17-after-city-spends-300-million-annually-to-solve-problem-n2546530" rel="nofollow">https:&#x2F;&#x2F;townhall.com&#x2F;tipsheet&#x2F;timothymeads&#x2F;2019&#x2F;05&#x2F;18&#x2F;san-fr...</a><p>[2] - <a href="https:&#x2F;&#x2F;sfmayor.org&#x2F;sites&#x2F;default&#x2F;files&#x2F;CSF_Proposed_Budget_Book_July_2020_LR_Web_REV2.pdf" rel="nofollow">https:&#x2F;&#x2F;sfmayor.org&#x2F;sites&#x2F;default&#x2F;files&#x2F;CSF_Proposed_Budget_...</a><p>[3] - <a href="https:&#x2F;&#x2F;www.sandiego.gov&#x2F;sites&#x2F;default&#x2F;files&#x2F;legacy&#x2F;iba&#x2F;pdf&#x2F;bpguide.pdf" rel="nofollow">https:&#x2F;&#x2F;www.sandiego.gov&#x2F;sites&#x2F;default&#x2F;files&#x2F;legacy&#x2F;iba&#x2F;pdf&#x2F;...</a><p>[4] - <a href="https:&#x2F;&#x2F;reason.com&#x2F;2018&#x2F;01&#x2F;05&#x2F;nimbyism-in-san-francisco-reaches-new-he&#x2F;" rel="nofollow">https:&#x2F;&#x2F;reason.com&#x2F;2018&#x2F;01&#x2F;05&#x2F;nimbyism-in-san-francisco-reac...</a>

does this target only CEOs? what about COOs, CTOs, and other C-level executives? Board members?

they should have approved taxes on landlords charging crazy high rents.

At this rate in 20 years California will be competing with Mississipi for the title of the poorest state in the country

Why doesn’t anyone want to address the elephant in the room, which is affordable housing?<p>Why not convert vacant offices to apartments?

Don&#x27;t CEOs only take $1 in salary anyways to keep their income taxes as low as possible and optimize for long-term capital gains through stock compensation instead?