In an effort to address the fast-growing wage gap between chief executives and general workers, voters in San Francisco overwhelmingly approved several tax measures targeting property owners and CEOs of large businesses.
Under the “Overpaid Executive Tax,” formally known as Proposition L, any company whose top executive earns one hundred times more than their average worker will pay an extra 0.1 percent surcharge on its annual business tax payment.
If a CEO makes two hundred times more than the average employee, the surcharge increases to 0.2 percent, three hundred times gets a 0.3 percent surcharge, and so on up to 0.6 percent.
According to a recent study published by the Economic Policy Institute, compensation for chief executives at the top 350 firms in the United States climbed 14 percent in 2019 to an average of $21.3 million. Chief executives now earn 320 times as much as a typical worker.
The CEO tax is expected to generate between $60 million to $140 million per year, and proponents are seeking to funnel most of the money into health services. A municipal analysis, however, noted that the amount could vary widely year to year.
The funds could be used to “support our health and public health systems, which are deeply strained from the consequences of inequality. We will hire nurses, social workers and emergency responders, and expand access and treatment,” the author of the tax measures Matt Haney, a member of the city’s Board of Supervisors, tweeted.
The progressive city’s voters also agreed to sweeping business tax changes that will lead to a higher tax rate for large tech companies, and a higher transfer tax on property sales valued between $10 million and $25 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.
Richie Greenberg, a political commentator and former mayoral candidate, warned in a filing to the city that the proposition would only further hurt struggling businesses.
“Companies would reduce or stop hiring low-level employees as an answer to this measure, if it should pass,” he wrote.
“Such a tax would most likely prevent the attraction of new businesses to relocate to San Francisco, at such a time as we are seeing unprecedented economic downturn due to the pandemic.”
Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.