San Francisco: Tax adjustment for high paying corporations

In San Francisco voters overwhelmingly passed several tax measures against property owners and big corporations.

According to a newly approved law, any company’s top management earns 100 times as much as its average employee will have to pay an additional 0.1 percent of its annual business tax. If the CEO earns 200 times as much as the average employee, the surcharge goes up to 0.2 percent, and so on.

Voters also agreed to an overhaul edit of business taxes that would raise rates for many technology companies and impose higher transfer taxes on property sales worth $10 million to $25 million.

“If the upper classes suffer from this, we will not cry for them. “The League of San Francisco voters wrote in its guide.

Wage inequality is rising in California. But critics say the surcharge a blatant attempt to redistribute wealth and accuse it of self-destructing by raising business taxes during the recession.

Since March, the coronavirus has depressed San Francisco's vibrant economy. Tourists are rare, and employees in the high-tech sector, as well as in the city's main business and financial districts, are leaving or moving to work remotely. Office vacancy rates have risen, and rents in this prohibitively expensive city have fallen to their lowest levels in years.

“During the economic shutdown caused by the outbreak, it is the wrong time to raise taxes”. Said Jim Woodman, President and CEO of the Bay Area Council and business advocacy group.

It is expected that CEO tax will generate $60 million to $140 million each year. Supporters of the bill want most of the money to be spent on health services, while rejecting concerns that the surcharge would drive businesses away, saying the tax is modest compared with the cost of relocation. They hope the tax will prompt companies to review their payment structures and eventually promote nationwide.

For example, Disney CEO Bob Iger’s salary was $48 million in 2019, and it dropped 28 percent compared to the year 2018.

This kind of tax is similar to a supertax on executive pay passed by The Portland, Ore., city council nearly four years ago. The city of San Francisco considered this idea several years ago. In 2014 the state proposed a tax cut for companies that paid executives less than 100 times the median worker, but it failed to pass the legislature.

“This idea didn't get many people’s support because the citizens of San Francisco didn't think it meaningless to tax the CEO.” Political consultant Jim Ross said. “But now things have obviously changed.”