San Francisco votes to rein in CEO pay

San Francisco citizens have voted overwhelmingly for a new tax on highly paid CEOs.

By a margin of 65-35, they voted to approve a ballot measure to increase taxes on corporations with extreme gaps between CEO and worker pay.

Under the new law, any company whose top executive earns more than 100 times a typical San Francisco worker's salary will have to pay a 0.1% surcharge on its annual business tax payment.

If they earn 200 times what the average worker does they will have to pay a 0.2% surcharge; 300 times they will have to pay 0.3%, and so on.

The “Overpaid Executive Tax,” formally known as Proposition L, was the brainchild of Matt Haney, a member of the city's board of supervisors,” he said.

He said the results “show that San Franciscans are concerned about growing economic inequality” and suggested the proceeds of the tax could be used to support health and public health systems.

“The very wealthy are gaining more and more,” said Haney. “They've gotten much richer during the pandemic, while everyone else has remained stagnant. We need the wealth that has been generated in the city to be shared more broadly with workers and residents.”

The move will encourage corporations to narrow their pay gaps, with city officials estimating the tax will raise $140m per year.

However, critics argue that the middle of a pandemic is the wrong time to raise business taxes.

There are also fears around unintended consequences that could hit the city’s success as a business community.

Richie Greenberg, a political commentator and former mayoral candidate, warned that the tax will only end up hurting businesses.

He said: “Companies would reduce or stop hiring low-level employees as an answer to this measures, if it should pass.

“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.”

Haney dismissed fears that the surcharge would hurt firms, saying the tax was modest compared to the costs of relocating.

San Francisco is the second US city to adopt a tax on CEO-worker pay gaps and follows Portland, Oregon, which passed a similar law in 2018 that applies only to publicly held companies.