Eliyahu Kamisher & Biz Carson (Bloomberg Law): Billionaires Win as Voters Halt San Francisco ‘Overpaid CEO’ Tax

San Francisco voters rejected a union-backed ballot measure to raise taxes on large corporations doing business in the city, a win for billionaires who argued that the levy would harm the city’s economic recovery.

The Overpaid CEO Act, known as Proposition D, would have generated over $250 million a year, according to a city estimate, by increasing taxes on any large business where the highest-paid executive earns 100 times or more than the median employee. 

Owen Tucker-Smith (Wall Street Journal): San Francisco Rejects a Tax Hike on Companies With Highly Paid Executives

An effort in San Francisco to raise taxes on companies with highly paid executives has failed.

A ballot proposal pushed by local unions would have expanded an existing surcharge on companies where the top executive makes more than 100 times the median salary of the local staff. The measure had secured under 47% of the vote as of Tuesday evening, compared with the opposition’s 53%

The defeat of Proposition D is a victory for the city’s top brass of moderate Democrats, who said more taxes risk driving businesses out of town. Politics in San Francisco have swung toward the center in recent years. Mayor Daniel Lurie, a Levi-Strauss heir with a background in philanthropy, has opposed efforts to raise taxes on companies and the wealthy.

Companies subject to the tax currently have to pay between 0.02% and 0.12% of their local revenue or between 0.08% and 0.48% of their payroll expenses, depending on the size of the pay gap between an executive and the local median worker and the type of company.

The measure would alter the tax so the median salary is calculated for all workers, not just local ones. That would likely subject new companies to the tax because San Francisco workers generally make more than those elsewhere. It would increase the surcharge rates to between 0.183% and 1.121% of local revenue or between 0.75% and 4.47% of payroll expenses.

The initial “overpaid CEO tax” was wildly popular when it first passed by a 30-point margin in 2020. But economists at City Hall have argued that the push to expand it would hurt the local economy. A recent report from the city’s Office of Economic Analysis suggested that though the measure could generate up to $300 million a year in revenue, any increase in public-sector jobs created by the tax would be outweighed by losses in private-sector jobs.