San Francisco Passes “Overpaid CEO” Tax
In an effort to address the growing wage gap between chief executives and their employees, San Francisco voters overwhelmingly approved what is believed to be the nation’s first tax aimed at fighting pay inequity. The “Overpaid Executive Tax,” formally known as Proposition L, will levy additional taxes to any company that does business in San Francisco and has top executives earning over 100 times more than their typical local worker.
Companies with executives who fall into this category face an additional 0.1 percent surcharge on their annual business taxes. The surcharge increases by 0.1 percent per factor of 100, maxing out at 0.6 percent. While Portland, Oregon passed a similar measure in 2018, that tax applies only to publicly held companies. San Francisco’s new measure affects both privately and publicly held companies. A municipal analysis estimates that the tax would bring in roughly $60 million to $140 million, but noted that the amount could vary from year to year.
Opponents to this plan argue that companies could reduce or stop hiring low-level employees altogether as a response to these measures. Such a tax would also dissuade large companies to relocate to San Francisco, ultimately harming the city’s efforts to overcome the unprecedented economic downturn as a result of the current COVID-19 pandemic.
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