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San Francisco voters approve taxes on highly paid CEOs, big businesses

• throwaway0a5e 6y ago
  Sounds like business will be booming for temp agencies as well as janitorial and facilities maintenance contractors. Whatever the net positive here is wholly negated by the number of stable long term jobs that are going to go away and be replaced by whoever the body shop chooses to send that day. Working for these middle men really sucks compared to working for whoever the service is being provided for (and I say that from experience).
  • umeshunni 6y ago
    More likely, this will just result in businesses continuing to leave San Francisco. The pandemic has given most companies a good reason to do so already and my bet is on most of them not returning to their overpriced San Francisco headquarters when this is eventually over.
    • rm_-rf_slash 6y ago
      Or just move it to a smaller office somewhere else in the Bay Area.
      • bluGill 6y ago
        Maybe, but is the rest of the Bay area enough better that they can trust they won't end up the same way in the near future.
        • shreyansj 6y ago
          Damn! Pretty sure that the rest of the Bay Area isn’t a dumpster fire either.
        • clhodapp 6y ago
          Contra Costa is full of open space and I believe that many of the cities from Walnut Creek out would bend over backwards to pull in these types of jobs.
          • umeshunni 6y ago
            There's a mini-silicon valley shaping up in the East Bay along the 580/680 corridor - towns like Dublin, Pleasanton etc are growing rapidly with existing companies and new ones - Oracle, Workday, Snowflake etc are all there. It helps that they are also much more new housing friendly than SF and SV.
            • clhodapp 6y ago
              Right! I wasn't thinking about stuff like Bishop Ranch being down there. Yeah, it really does seem like most of the freeway/transit-connected East Bay towns beyond the hills would be very amendable to this type of growth. It really seems like the only exception would be the arc from Orinda to Danville.
        • newhkusers1 6y ago
          Yes, they are better. Also, this isn't the only silly tax law that SF has.
      • ashtonkem 6y ago
        It’s hard to determine what’ll happen due to pandemic + remote work, but historically nearby counties with lower taxes have always been the biggest risk for high tax municipalities. Think less “I’m leaving NYC to go to Michigan” and more “I’ll move to New Jersey and commute into NYC”. But again, the pandemic and rise of remote work makes this hard to predict.
      • cobookman 6y ago
        They said SF, not SF Bay area. I'm certain the city of SF will be seeing a loss of jobs as they move to Oakland, East Bay, Peninsula and South Bay.
    • LinuxBender 6y ago
      A law firm I use has been in SF for over 20 years. They just moved to a rough part of Oakland. The move was challenging for them and I know they would not have done it if they didn't have to.
      • RangerScience 6y ago
        Why did they have to move? This new law, or something else?
        • LinuxBender 6y ago
          This was in the middle of Covid, around the time many businesses and renters were leaving SF. They would not give me specifics, but I assume it no longer made financial sense to be in that expensive high-rise, as all the parking was locked down, forcing all the customers to take BART. I am not sure what affect this new law will have for those that remain.
          • TuringNYC 6y ago
            Another reason SF companies are leaving: restrictions mandating lower maximum elevator occupancy (e.g. 4 persons) is causing long lines at some high-rises, making it hard to get in and out of the building -- esp for quick breaks, food pickups, lunch, etc.
            • LinuxBender 6y ago
              I noticed that as well. The building had really tiny elevators, but many of them. You could fit maybe 3 people in them. I had never seen anything like that in my life.
              • TuringNYC 6y ago
                Much worse since COVID since every elevator has to have minimal separation for passengers, no more squeezing in like sardines.
    • heavyset_go 6y ago
      I doubt it. The purported reasons to leave were already on the table before the pandemic hit, but they were not enough to do so when compared to the reasons for staying. The pandemic is relatively temporary, and once it is over, those reasons for staying will still be on the table.
      • TedDoesntTalk 6y ago
        > The pandemic is relatively temporary Until the next ones comes. That could be in 1 year or 100 years. No one knows. Reminds me of the repeated hurricanes that drive people out of coastal areas.
        • heavyset_go 6y ago
          > Reminds me of the repeated hurricanes that drive people out of coastal areas. People still live in coastal areas, and rich people continue to build lavish vacation homes on the coast despite the fact that they're washed away by storms every couple of decades. Part of being rich is not having to worry about money, which is why many rich people live in cities, states and countries that tax them more: the benefits of doing so outweigh the costs. I think you can draw parallels between that and companies choosing to remain in cities for similar reasons despite some drawbacks existing.
          • TedDoesntTalk 6y ago
            Sorry you focused on my comment about coasts. I was really just trying to point out that another pandemic can happen and can happen soon.
            • heavyset_go 6y ago
              I didn't focus on it because I agree with you.
    • tlogan 6y ago
      Maybe but outsourcing is much easier solution than relocating. Think about hedge funds, bond traders, etc. For example, they will be all firing desk support people and replacing them with RobertHalf.
    • kmtrowbr 6y ago
      I have lived in San Francisco since 2005. Over the time I've lived here, we've had the opposite problem: lots of highly paid tech firms moving into SF. This has changed the nature of San Francisco in a way that many dislike, including me. I was initially attracted to San Francisco because, it was chill, it was beautiful, and it had a lot of eccentric, really interesting people. Many of our good friends had to leave over the years as SF has becoming more unlivable because rents have gone up so much, and also it's just not as fun, it's crowded and stressed. I am aware that I am a part of the problem: my wife and I are white, yuppie, dink tech workers. :) These issues are complex. I voted yes on Proposition L: the tax is quite small and I think the tech firms are unlikely to leave, meanwhile SF can get more taxes from them (many of them were historically given tax breaks, like Twitter, to move into the mid-market area). If they do leave, I don't see that as a bad thing. Meanwhile socioeconomic disparity is an oozing sore in San Francisco, we have billionaires rubbing elbows with homeless people every day. Nationally, we've had round after round of tax cuts for the wealthiest, if SF wants to tax excessive income disparity, I say, fair enough.
      • drak0n1c 6y ago
        Taxes tend to increase price levels, not reduce them. Costs are passed through to every level.
        • gmadsen 6y ago
          not 1-1. a personal wealth tax is not felt or distributed down lane. As long as it is not a company tax, it will not be directly pointed to the buyer.
          • kansface 6y ago
            > The tax will levy an extra 0.1% to 0.6% on gross receipts made in San Francisco for companies ...
          • stale2002 6y ago
            > personal wealth tax is not felt Yes it would be. A tax on salaries, would force companies to have to pay more to attract talent. And these are additional costs that the company would have to pay.
    • gmadsen 6y ago
      I don't understand why this is said as a negative. Tech needs to expand to other parts of the country. If SF wants high taxes, so be it, let all participate in the competition of where to be located.
  • _jal 6y ago
    How many SF companies have FT in-house janitorial and facilities now? I've worked for a lot of (admittedly, tech startup) companies, and none of them have. For that matter, companies I've worked for who needed telephone-answerers or other low-compensation service workers have already spun that off into separate companies, for a similar reason - google '401K highly compensated employee' to see why.
  • gumby 6y ago
    The total amount is so small I have a hard time believing that anyone would restructure their operations around it.
  • gcheong 6y ago
    CEO compensation historically wasn’t orders of magnitude greater than worker pay like it has ballooned to today and there were plenty of long term jobs. This just formalizes the idea that there shouldn’t be an egregious difference in compensation that was commonplace before the idea that a corporation’s sole purpose is to maximize shareholder value became the main driver of CEO compensation.
    • rm_-rf_slash 6y ago
      I think you missed parent’s point, which is that companies will have (yet another) incentive to replace their lowest paid workers with contractors. First they came for the janitors, but I did not speak up, for I was not a janitor...
      • XorNot 6y ago
        I'm completely at a loss as to why they wouldn't have already done as much of this as it was conceivably possible to do right now - or wouldn't get there eventually. Companies don't pay you more money because they CEO looks at his salary and goes "yeah I think I have enough".
        • bluGill 6y ago
          Because outsource vs in house is not a simple decision. there are many factors each with a set of pros and cons. Sometimes outsourcing lets "them" focus on efficiency and getting the details right and so you are better off. Sometimes out sourcing cuts quality to get better costs. There are many accountants, it is relatively standard across industries, and so you can outsource it all easily - but most big companies have it in house anyway. (though they will hire out some of the grunt work) This is one area where messing up will kill your company so you better keep a close eye on it. (An accountant can easily steel enough money that you can't maintain cash flow - you might get the accountant in prison but your great company is bankrupt anyway). This is but one example of many cases where out sourcing is bad. On the other side power utilities outsource most tree trimming around power lines. The companies that do this work give the utility a great deal because the contract that keeps their crews busy 3/4ths of the year which is important because most of this type of work is right after a storm and employees are easier to keep when they aren't laid off 3/4ths of the year waiting on the next job. When an out sourcing is borderline not worth it because of risks above it, it may become worth it after this change.
  • momokoko 6y ago
    Sounds like you don’t live in the Bay Area. Almost every tech job that isn’t salary, and plenty of salary jobs, already are. It is standard practice in the Bay Area to use staffing agencies for everything but executives and core talent with all signs pointing to the practice becoming even more common well before this.
  • 908B64B197 6y ago
    Wait until a commercial robot-vacuum/robot cook provider comes along and underbids the temp agency. You can rent a robotic fry cook for 1'500$ a month from Miso Robotics [0]. I know somewhere someone is looking at a commercial-grade surface cleaner and trash-picking robot. [0] https://www.theverge.com/2020/10/6/21503892/miso-robotics-flippy-roar-robotic-fry-chef-on-sale-price https://www.theverge.com/2020/10/6/21503892/miso-robotics-fl...
• newbie578 6y ago
  Why doesn’t anyone want to address the elephant in the room, which is affordable housing? Why not convert vacant offices to apartments?
  • lhorie 6y ago
    That doesn't seem all that relevant to the topic of taxes, and even if it did, I don't believe there's a very good correlation between increases in CA taxes and improvements in the housing situation.
    • Rebelgecko 6y ago
      The amount of money that this is expected to bring is ≈ to the size of SF's homelessness budget so it's not the biggest stretch to link them (although you could bring up lots of other issues to)
  • yftsui 6y ago
    If offices become vacant, what is the motivation to live in the city anyway?
    • blackguardx 6y ago
      Plenty of people commute in to work in non-tech jobs. Some of those folks would love to live in SF if rent was cheaper.
  • dmitrygr 6y ago
    there are many political reasons. i'll list some logistical ones: fire codes? not enough bathrooms? lack of showers?
    • djrogers 6y ago
      > not enough bathrooms? lack of showers? Err, plumbers exist, and showers and bathrooms are added to commercial buildings all the time. Nobody is suggesting simply telling people to live in existing office space as-is - converting them would include accounting for these things.
• pc86 6y ago
  Does anyone have the text of the law, or a detailed description of it? > Under a newly approved law, any company whose top executive earns 100 times more than its average worker will pay an extra 0.1% surcharge on its annual business-tax payment. If a CEO makes 200 times more than the average employee, the surcharge increases to 0.2%, and so on per multiple of 100. What do they mean by "earns," are bonuses included? Nonmonetary compensation like having your car or mortgage paid for directly? Increase in stock value that's part of your comp package? I'm sure folks will try to game this to get around it, I'm just curious how. Also it sounds like this is a surcharge on taxes paid, not actually a new tax on revenue. So if you pay $1 million to the city of San Francisco in taxes, and your CEO earns exactly 100x more than the average worker, you now have to pay... $1,001,000?
  • JumpCrisscross 6y ago
    > I'm sure folks will try to game this to get around it, I'm just curious how Lay off everyone making less than 200x the top earner. Move to remote workers where possible, outside contractors where not.
    • ashtonkem 6y ago
      Fire low paid workers such as support staff and outsource that to staffing agencies. That’s the easiest way to game this number.
      • gojomo 6y ago
        Ensure your outsourcing is not in SF. The outsourcing firm CEO pays themself whatever damn multiple they like. Voila, SF keeps all the cushy jobs they like, makes the working poor someone else's problem.
• hawkoy 6y ago
  From: https://calmatters.org/california-divide/2020/11/san-francisco-ceo-tax-income-gap/ https://calmatters.org/california-divide/2020/11/san-francis... > The tax will levy an extra 0.1% to 0.6% on gross receipts made in San Francisco for companies whose highest paid executive makes 100 times or more its median worker’s salary. The amount levied will increase in 0.1% brackets proportionally to the pay ratio. A company whose highest paid employee earns 200 times more than its median San Francisco worker will get a extra 0.2% charge on its gross receipts. For companies whose CEO makes 300 more, the charge jumps to 0.3% and son on. The tax caps at 0.6%, and only companies with gross receipts over $1.17 million will be targeted. > Under the measure, gross receipts and CEO compensation will include money made from stock options, bonuses, tax refunds, and property, a caveat seen by many as a way to target the tech sector where CEOs are often compensated in non-salaried bonuses. Tech is expected to account for 17% of the tax revenues, according to an estimate by the city’s chief economist, while retail and financial firms are expected to account for 23% of the revenues each. > The CEO tax is expected to generate between $60 million to $140 million per year. Doesn't seem that big in comparison to what SF annual budget is. From (because the article doesn't give exact figures on transfer taxes): https://sfcontroller.org/sites/default/files/Documents/Economic%20Analysis/200654_economic%20impact_final.pdf https://sfcontroller.org/sites/default/files/Documents/Econo... ? > Proposed legislation would raise the Transfer Tax rate on properties in the city that sell for more than $10 million. For properties selling for between $10 million and $25 million, the rate would rise from 2.75% to 5.5%. For properties selling for over $25 million, the rate would rise from 3% to 6%.
  • names_are_hard 6y ago
    Additionally, tech companies use outsource their low paid labor. I don't see how they'll pay this tax.
  • alexeichemenda 6y ago
    >Doesn't seem that big in comparison to what SF annual budget is. There are no singled-out pockets that you can tap into and make up SF annual budget. It's all about cumulating a lot fo long-tail small pockets + 1-2 large pockets.
  • 6y ago
• sokoloff 6y ago
  > hopes the tax will drive companies to reexamine their compensation structures Outsource the lowest paid workers to a subcontractor to raise your average employee wage. I’m not sure that has a desirable effect, but it seems this law certainly financially encourages that.
  • kyleblarson 6y ago
    It will do more to force them to reconsider where they domicile their businesses than it will force them to reconsider their comp structures.
  • briandear 6y ago
    Or just leave San Francisco. Stripe left. Bechtel, McKesson, Petrovich, Jamba Juice, Core-Mark, Houzz, Lyft, Xero, Pandora, Robin Hood, and hundreds others have moved their HQ to somewhere other than California. You can pay lower paid workers a higher effective wage in pretty much anywhere but California.
  • e12e 6y ago
    > Outsource the lowest paid workers to a subcontractor So, then the sub contractor pays the taxes and invoice you with mark-up? Because those companies have ceos too? I think this is rather fascinating. Assume a de-facto minimum wage of 10 dollars an hour, 2000 hours/year for 20k/year lower bound. 200 times that is 4M usd/year in compensation for a single individual. Does seem wierd to see such a big difference in campensation. If nothing else, seems to illustrate a broken labour market with horribly skewed bargaining power.
    • sokoloff 6y ago
      I don't see the reason that the contracting firm CEO would likely clear $2M/yr as a low-risk, mostly undifferentiated supplier of office services. (That’s where the markup to the clients comes from, not the tax.) But if the tax does become a problem, split into OfficeServicesA and OfficeServicesB corps and let your clients pick which one they'd like to hire. Or have your spouse or family member do some of the administrative work (for business continuity reasons) and split the comp.
• CodesInChaos 6y ago
  I'm sure companies will find a way to avoid the tax. Splitting the company (low income workers are already rarely employed directly), finding compensation forms that don't count,... The real estate transfer tax sounds rather misguided as well. I expect it to distort the already unhealthy real estate market in harmful ways. I'd rather go for higher ground value taxes with reductions for high density occupancy or people who live in that building themselves.
• moralsupply 6y ago
  At this rate in 20 years California will be competing with Mississipi for the title of the poorest state in the country
  • d33lio 6y ago
    The worst case scenario is a democratic super majority where CA and it's insanely mis-managed cities are bailed out by the federal government. Think GM Auto Bailout, but this time for an entire state... This is coming from someone who's never voted for a single republican. Let's remember that [0] SF also just elected a DA who's parents were literally complicit in the Weather Underground bombings... [0] - https://californiaglobe.com/section-2/san-francisco-voters-elect-son-of-cop-killing-terrorists-as-district-attorney/ https://californiaglobe.com/section-2/san-francisco-voters-e...
    • beart 6y ago
      As a California outsider, I had a very difficult time making it to the end of the article you linked. Maybe Chesa Boudin is a terrible person, but that article alone just reads like someone's angry rant and told me very little about Boudin himself.
• bigbossman 6y ago
  I doubt it has the intended effect as SF tech companies are already moving to distributed locations. Workers have had the past 8 months to enjoy avoiding long commutes and stepping over needles and feces.
• dudul 6y ago
  "Average worker" sounds like such an easy metric to game. They just should have used "lowest paid worker".
  • lizardmancan 6y ago
    how low seems more interesting.
• notJim 6y ago
  This design seems really odd. Why target business and CEOs in particular? Why not just have a straightforward high progressive tax? It also seems like it will reward the practice of outsourcing lower-paid job functions, or discourage employers from hiring lower-paid workers generally. The whole thing seems designed as a punitive measure, without really thinking about what incentives it creates.
  • StreamBright 6y ago
    You do not want to hurt politician revenues.
  • yonran 6y ago
    State law prohibits local governments from using progressive income taxes <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=17041.5 https://leginfo.legislature.ca.gov/faces/codes_displaySectio....>. San Francisco therefore uses a combination of gross receipts taxes (whose rates vary depending on business NAICS industry code and are graduated), payroll taxes (now repealed), real estate transfer taxes, sales taxes, and parcel taxes. In my opinion, the state legislature should amend RTC 17041.5 to allow local income taxes, but only on rent, imputed rent, and capital gains within the city. Rents are the thing that local governments can tax without distorting the market. As for this performative CEO tax, I think that the only positive effect that it will have, if any, would be to raise awareness of an issue whose solution has to come at the national and state level.
• rdiddly 6y ago
  "Critics call the surcharge a blatant attempt at redistribution of wealth..." Um, yes? "Critics call John Travolta 'blatantly an actor, playing parts in movies.'"
  • spinningslate 6y ago
    that was my reaction too. I don't live in the US, so this is an honest question. Most of the comments here are disparaging about the policy. Is that because: 1. you agree with the principle of addressing wealth polarisation, but don't agree with tax as the mechanism? (in general or the proposed model specifically) 2. you don't agree that increasing wealth polarisation needs to be stopped/reversed? 3. something else? Thanks. -- Edit: fixed the numbering, forgot I wasn't writing markdown!
    • d33lio 6y ago
      Most motivated people with the means to scrape enough cash together to even try to start something dislike legislation and the idea of "redistribution" because usually these plans raise far less money than politicians think, but moreover the politicians coming up with these plans have already proven they have no clue how to spend taxpayer dollars. To be frank, as a supporter of capitalism - I generally support the notion of high taxes in europe because the populations who pay these taxes clearly see HUGE societal benefits as a result of half their income evaporating. There also seems to be more respect of the people's money from these gov'ts regarding how they spend taxpayer money is spent and with a clear aim to help the people NOT partisan goals, wars etc. I may be incorrect here (open to correction) but it seems like US politicians (federally at least) seem entitled to taxpayer dollars. Most forget that until WW2 the idea of federal witholding simply wasn't a thing and many middle class families were flushed with savings. Unfortunately, both sides are at fault in the US. The only way this is going to change for the better is to cease the cycle of one political party only pandering to it's base instead of motivated and able americans.
      • RangerScience 6y ago
        > to cease the cycle sooo ranked choice voting? :D
• textech 6y ago
  San Francisco is the 16th largest city by population and has a budget of around 14 billion which is like 6 or 7 times larger than many cities with much bigger population. This is just a badly run city and throwing more money at their problems isn't going to help them.
  • 6gvONxR4sf7o 6y ago
    Even if you don't account for anything else, the high cost of living here translates to expensive city employees and expensive services. If you account for the "exchange rate" between San Francisco dollars and other city dollars, I wonder how the per capita spending stacks up. I expect it still doesn't look good, but I bet it looks a lot less ridiculous.
    • reducesuffering 6y ago
      It is the city's fault the housing is expensive, which is the reason for the high cost of living.
      • 6gvONxR4sf7o 6y ago
        Maybe if San Francisco did things differently, costs might look like other cities and counties in the Bay Area. Either way, it's going to be much more expensive than your typical city.
        • reducesuffering 6y ago
          > costs might look like other cities and counties in the Bay Area True, but most likely in a way that also reduced the cost in other cities and counties, because the high cost of SF has pushed people out to lower cost areas in the outskirts. If SF wasn't so expensive, more people from the surrounding area would live there, having the desire if price wasn't the issue, therefore reducing demand and thus costs for the outer areas.
    • deleted 6y ago
      [deleted]
• 6gvONxR4sf7o 6y ago
  What a massive incentive for companies to not classify people who do their work as employees. You don't have to pay extra CEO taxes, and you don't have to provide benefits!
• WalterBright 6y ago
  > He dismisses fears that the surcharge will drive companies out of the city, saying the tax is modest in comparison to the cost of moving a business. Perhaps - but it will discourage new businesses from locating there, and new businesses are the future.
  • bradlys 6y ago
    Let me weigh the pros/cons here: Pros: lots of funding, lots of experienced employees who have taken companies from seed to IPO, probably a higher chance than some other areas to go from well off to ridiculously rich Cons: I get taxed more if I start making 200x what the average employee in my company makes. Can you see how no one would care unless they're 100% sure they're gonna be making 200x what their average employee makes regardless of where they put their business?
    • conanbatt 6y ago
      The alternative is not having the office in SF.
    • WalterBright 6y ago
      They don't need to be 100% sure at all. The whole point of the startup is to get ridiculously rich.
      • reidjs 6y ago
        This reminds me of that episode of South Park where they form a band but refuse to play until internet music piracy stops. I doubt that someone talented enough to build that kind of company is going to factor this into their decision to run it from SF.
        • WalterBright 6y ago
          I suspect a big part of Jeff Bezos relocating to Seattle to start Amazon was Washington does not have a state income tax.
• franklampard 6y ago
  SF has so much tax revenue, but where is it spent?
  • newhkusers1 6y ago
    Homeless services takes a big cut.
  • tmcw 6y ago
    https://sfmayor.org/sites/default/files/CSF_Budget_Book_June_2019_Final_Web_REV2.pdf https://sfmayor.org/sites/default/files/CSF_Budget_Book_June... Trains, streets, cops, hospitals, public works, 31k employees, and so on.
• conanbatt 6y ago
  "saying the tax is modest in comparison to the cost of moving a business." Basically admitting that the thought process is charging as much taxes as you can possible get away with.
  • smolder 6y ago
    I agree they shouldn't be seeking to grow their budget endlessly. Why do we accept that behavior from businesses? IME, they often effectively ruin their own products and do harm to society by attempting to extract the maximum benefit from market position. It seems that in many people's opinions they're just behaving as they should.
    • conanbatt 6y ago
      The business is making money by a voluntary exchange: the tax is not a voluntary contribution. Maximizing lack of consent is not the same as maximizing voluntary exchanges.
  • boulos 6y ago
    That is the point of optimal tax theory: maximize revenues while minimizing downside.
    • conanbatt 6y ago
      I see plenty of downsides in SF's tax structure.
• jariel 6y ago
  'Which companies' does this rule apply to? Companies that have HQ in SF? That's rather an easy thing to change, no? 'Majority of Employees'? What if the CEO has 'an office' in South Bay but spends their time in the city? This seems like the wrong tranche of government to be flirting with such a law.
• deleted 6y ago
  [deleted]
• zjs 6y ago
  There's some thoughtful analysis of the proposition from SPUR: https://www.spur.org/voter-guide/san-francisco-2020-11/prop-l-disproportionate-ceo-pay-tax https://www.spur.org/voter-guide/san-francisco-2020-11/prop-...
• d33lio 6y ago
  With policies like this, why would anyone in their right mind (I say this as a staunch progressive) start a business in SF or even consider traveling to the Bay Area for the benefits of huge equity packages? Even if you choose to willingly ignore that CA state taxes are also increasing substantially. I hate to say it, but when you do things like this to Big Business TM it DOES have trickle down effects that negatively affect small business owners and business services alike.
  • bdibs 6y ago
    > He dismisses fears that the surcharge will drive companies out of the city, saying the tax is modest in comparison to the cost of moving a business. It doesn't seem like they're too worried about new businesses, they're just trying to hold the current ones hostage.
• jedberg 6y ago
  To everyone saying, "this will kill low wage jobs", most companies already outsource their low wage jobs. Their janitors and cooks and maintenance people are already via contractors. Their lowest paid employees are most likely their admin assistants at $50K a year. So basically this is targeting companies whose CEOs make over $50M a year, which is basically Twitter, Pinterest, Google, Facebook, Uber and a few others that actually have an office in San Francisco. And I'm sure Google and Facebook et. al will fight them over how much money they "make" in San Francisco.
  • diebeforei485 6y ago
    Not all of them. Some baristas and cooks were directly employed by the company, but certainly there is even less incentive to do that now.
  • csomar 6y ago
    Google and Facebook are in the SF Bay Area and not in SF City. Also, Zuckerberg gets a $1 salary. Unless this law targets full compensation (stocks included), it's not going to touch him. FB is too big to accept a 0.1% or 0.6% gross tax. This law is targeting smaller companies (think Stripe and similar). San Jose is an alternative for the CEO/Headquarters. There could be a minor office in the city where tech workers prefer to live, or they could commute down instead of up. Imo, SF City is overplaying their hand here and might be in a bit of a shock for the reality of how business works. The last bubble and good times might have distorted their understanding.
    • cody3222 6y ago
      Yes, it includes stock options, property, etc. Basically all compensation. Source: https://calmatters.org/california-divide/2020/11/san-francisco-ceo-tax-income-gap/ https://calmatters.org/california-divide/2020/11/san-francis...
      • stickfigure 6y ago
        Is Facebook still giving Zuck bonuses or new stock issues? Isn't Zuckerberg's wealth composed entirely of stock that he already owns? So how is this going to affect Facebook?
• Spinnaker_ 6y ago
  Is this just salary or total compensation? If it's just salary then it's easy enough to compensate the CEO in one of many other possible ways. I wonder if the median CEO will start making more. The going rate will become 99x approximately the SF average salary of 98k, or just under 10mm.
• bitwize 6y ago
  In other news, highly paid CEOs and big businesses approve moves out of San Francisco. Did you think it would end any other way?
• lpolovets 6y ago
  I wonder how many low margin businesses will leave SF because of this. If I understand it right, this is up to a 0.6% tax on gross receipts. What if a business runs on very thin margins? I can imagine someone like Waste Management ($50b company, $11m in CEO comp, median employee probably makes waaaay less than that) deciding that operating in SF is no longer worth it.
• diebeforei485 6y ago
  This is a terrible law. How exactly do you measure the compensation of the CEO of Ikea (moving into SF soon at 6th and Market), Adidas, DJI, Atlassian, Spotify etc? Exchange rates fluctuate a lot and stock based compensation is tricky.
  • standardUser 6y ago
    You're arguing that modern finance is so complicated that it should be exempt from taxation.
  • thrill 6y ago
    The cost of compliance is never factored into the making of law.
  • xg15 6y ago
    What would you do instead?
    • diebeforei485 6y ago
      I would recognize that taxing pay ratio is a ridiculous concept because temp agencies can be used (and already are used) for lowest-wage jobs like janitors. These are not independent contractors, these are W2 employees of a temp firm. What I would do instead is tax highly paid executives. This does not have the side-effect of making companies only use temp firms (as described above) if they need a barista or receptionist.
      • xg15 6y ago
        > What I would do instead is tax highly paid executives How do you define who is a highly paid executive?
        • diebeforei485 6y ago
          You could use any definition including their own (but tax the person, not the whole company), or any alternative definition like income > $1M.
• b20000 6y ago
  they should have approved taxes on landlords charging crazy high rents.
• okprod 6y ago
  A number of those taxed are just being incentivized to move elsewhere.
  • anon_d 6y ago
    Yes. Please move elsewhere.
• MR4D 6y ago
  If you want to read the actual text of the law, go here [0] and scroll down to the letter "L". [0] - https://sfelections.sfgov.org/measures https://sfelections.sfgov.org/measures
• deleted 6y ago
  [deleted]
• standardUser 6y ago
  This is a small tax and should be considered a pilot program for an idea that's been around a long time. Are all of the criticism on here valid? We'll find out soon enough. Will a tax like this actually change behavior in desired ways, or provide a useful amount of revenue? We'll find that out, too. But what this tax will not do is change the very nature of San Francisco or dramatically alter its business environment. The tax is just too small for that to be the case. It's a tiny addition to a vast and complex and ever-changing web of taxes and regulations that large businesses in SF have been successfully dealing with for generations.
  • echelon 6y ago
    > But what this tax will not do is change the very nature of San Francisco or dramatically alter its business environment. Businesses are already leaving SF. If they haven't seen the writing on the wall, they're ignorant. SF has itself to blame. They squandered revenue, didn't fix real issues, and pandered to land owners. Businesses will move to more business friendly cities, and they will become more distributed - it's cheaper and easier to negotiate that way. SF is done.
    • standardUser 6y ago
      "Businesses are already leaving SF" San Francisco has been a global epicenter of new business creation in the past couple decades. Some of the most massive corporations on the planet have come to and expanded in SF in that time. Office rents have skyrocketed as a result, as has new office construction. You're entitled to your own opinion, but don't lie.
      • echelon 6y ago
        > You're entitled to your own opinion, but don't lie. Don't be so accusational. I'm not lying. [1,2] > San Francisco has been a global epicenter of new business creation in the past couple decades. Some of the most massive corporations on the planet have come to and expanded in SF in that time. Don't ignore or discount change. Nothing stays the same forever. Companies are starting up elsewhere and plenty of SF headquarters are pulling up roots. [1] https://www.sfchronicle.com/business/article/2nd-most-valuable-U-S-startup-to-leave-SF-as-14558067.php https://www.sfchronicle.com/business/article/2nd-most-valuab... [2] https://www.bizjournals.com/sanfrancisco/news/2020/05/29/startups-ditch-offices-life-after-san-francisco.html https://www.bizjournals.com/sanfrancisco/news/2020/05/29/sta...
• thrill 6y ago
  Yeah, that won't have any unexpected effects. U-Haul is 20x what it was 20 years ago. How much higher can it go.
  • yboris 6y ago
    Could you share a bit more context? What happened with U-Haul?
    • macinjosh 6y ago
      I am not OP but my take is that hordes have been movin out of California to escape from taxes and regulations. Often they leave in a U-Haul, making it a booming business.
    • thrill 6y ago
      In a society that has reasonably established freedom of movement, which the US Constitution does fairly well, sufficiently onerous policies, where the sufficiently part is decided by those who bear the payment burden and not by the levier, eventually result in the target actively deciding to exercise that right to just leave. It's a big country, and there are many nice places in it where a decent life can be lived with less burden. U-Haul's stock price increase over the last two decades can be viewed as fairly reflecting such inter-state movement.
      • brigade 6y ago
        ...why? The last 4x increase was 2012-2015, then it's been pretty stagnant since then. So has inter-state movement been stagnant for the last 5 years? 2006-2011 was the housing crash and recovery; it doesn't seem like an outlier from the overall stock market. Before that, it collapsed from 2000 to 2003, then gained 5x over its previous highs from 2003-2006.
• cody3222 6y ago
  This raises some interesting questions / side effects: 1) Companies may now have a direct incentive to have their lowest income earners be outsourced/contracted out to boost the median pay amount. 2) It was smart of them to include compensation such as stock options. However if a city starts to expect this income, it will all go away in recessions when CEO's stock options are not valuable. ie more money to the city in boom periods and not much in bust cycles.
  • colordrops 6y ago
    CEOs are all just going to move out of San Francisco.
    • Alupis 6y ago
      And/Or move their companies too. Particularly all the "tech startups" that think they don't need physical office buildings anymore. For a lot of companies, SF is becoming difficult to justify. Well-intended ideas, not fully thought out, leading to unintended consequences... nothing really new for SF.
      • vmception 6y ago
        That’s because the “mostest wokest” dont live in SF long enough to be bothered by the consequences of their votes.
      • dicroce 6y ago
        People in San Francisco have long been angry at tech workers for driving up prices... Driving them out may be on purpose!
        • sadfev 6y ago
          If that’s the goal then I think this is a good initiative.
          • 6y ago
• cody3222 6y ago
  This raises some interesting questions / side effects: 1) Companies may now have a direct incentive to have their lowest income earners be outsourced/contracted out to boost the median pay amount. 2) It was smart of them to include compensation such as stock options. However if a city starts to expect this income, it will all go away in recessions when CEO's stock options are not valuable. ie more money to the city in boom periods and not much in bust cycles.
  • xg15 6y ago
    The lowest income earners that can easily be outsourced are very likely already outsourced.
• jameslk 6y ago
  Why do these discussions always revolve around the collection of taxes instead of how the taxes will be used? Would anyone be complaining if they knew the taxes would be more beneficial? Conversely, wouldn't we reject these new taxes if we knew they weren't going to be a greater benefit? Does anyone even know how the taxes will be used?
  • cody3222 6y ago
    This is such a good point. It's as if the argument is that more taxes is good no matter what rather than knowing what/why you're taxing in the first place.
    • jameslk 6y ago
      Yes exactly, it's like everyone is arguing past each other with different assumptions about how taxes will be used. Take this quote from the article: > “We need the wealth that has been generated in the city to be shared more broadly with workers and residents” This person seems to assume the taxes will be shared with the workers and residents. Would they still support these taxes if that were not the case? Others (in this discussion) seem to think the taxes will be thrown at things that don't benefit the city. Maybe so? Would they be more supportive if they knew it was for something they believed in?
      • cody3222 6y ago
        I absolutely love the historic example of taxes that Benjamin Franklin talks about in his biography: he says he went to all his neighbors' houses and asked if they wanted to chip in a nickel a week and have one of the neighborhood boys sweep the street for everyone's benefit every week. Most said yes and paid the fee. This is literally what tax is in the most simplistic form (let's pool our money to get something we couldn't otherwise have - military, roads, other infrastructure). Unfortunately, now we live in a world where we just talk about taxation for the sake of putting money into the pot and have no real idea or influence over how that pot of money is spent. A government that can move towards this Benjamin Franklin kind of simplicity of taxes would make its country such a better place.
• stevev 6y ago
  A great way to push companies out of your state.
• ryankupyn 6y ago
  Having the pay ratio be relative to the "Median San Francisco worker" might have some interesting effects - for financial/tech firms who want to avoid the tax they might just shift their ~25% lowest paid workers to an office in Oakland (though any corps with a mandatory physical presence like retail won't be able to do this).
• thursday0987 6y ago
  San Franciso is a city, so I imagine what will happen is that companies will move out of the city limits and this new tax will be completely ineffective. Seriously, how hard is it to find a new office in Oakland or San Jose?
  • bitwize 6y ago
    When Connecticut hiked its taxes, even long-standing businesses headquartered there, like GE, packed up and moved to Massachusetts. (You know you're doing something wrong when "Taxachusetts" is a relative tax haven compared to your state.) So even if these changes were implemented statewide, it can be an impetus to leave. Laffer's curve is a bitch for the eat-the-rich crowd.
  • quickthrower2 6y ago
    Might be effective in reducing rents though!
    • dpoochieni 6y ago
      Probably office rents only, not residential
• thursday0987 6y ago
  does this target only CEOs? what about COOs, CTOs, and other C-level executives? Board members?
  • jefftk 6y ago
    highest paid executive makes 100 times or more its median worker’s salary
    • derision 6y ago
      2 months from now: nation's first executiveless company
      • stevehawk 6y ago
        isn't that what Valve pretends to be?
      • mrits 6y ago
        The only executive is the CEO's mother making $50K/year
    • deleted 6y ago
      [deleted]
  • texasbigdata 6y ago
    Board member comp should rarely be that high given their part time status.
  • dragonwriter 6y ago
    > does this target only CEOs? No, "CEO Tax" is a popular term for this style of tax, but its not tied to CEOs specifically; its triggered by the pay ratio between the "highest paid managerial employee" of the firm and the median full-time-equivalent pay of full-time and part-time employees based in the City.
• chmod600 6y ago
  The financial success of San Francisco has covered for a lot of bad policies. I feel like the tech boom is somewhat like a "resource curse". Obviously tech has a lot more positive economic development associated with it, but a lot of it can just pick up and move to the peninsula or south bay. It seems like a potentially bad mix where a lot of people live in SF just for the money, and as soon as a downturn hits amd the bad policies start to have consequences it will just hollow out. That may be happening now.
• maerF0x0 6y ago
  The politicians have shown their hand by not designing this legislation to instead have companies pay their employees more. Why do I say that? It's currently cheaper to pay the tax than give the raises to your employees. So politicians have shown it's just a money grab _For the Government_ more than for the employees. Let's say I make $100 and the mean is $1. I'll pay 0.1% on tax payments.
  • singron 6y ago
    It's a gross receipts tax on the business. E.g. so if you make $100, but the business has $1,000,000 in gross receipts, then 0.1% would be $1000 in taxes or 10x your total compensation. It's got teeth.
    • maerF0x0 6y ago
      its a function of number employees and gross receipts. So companies with more employees relative to gross receipts will have less incentive to increase wages. also increasing the taxes by an additive 0.1 points (ie not multiplied by 1.001) disproportionately targets the lower gross receipts companies (such as restaurants, which would more than double their GR tax) Still seems like bad policy
      • maerF0x0 6y ago
        EDIT ^^ And to be clear i mean the actual policy, not the intended goal of the policy (to help shrink Exec pay gap w/ average pay)
• cblconfederate 6y ago
  Since this is transparently easy to game, i wonder which people is it supposed to be pandering to?
• arram 6y ago
  For people who point out that this incentivizes companies to leave San Francisco, that's probably not a coincidence. Many SF politicians see tech as the enemy and would be happy to see companies go elsewhere.
  • MR4D 6y ago
    Based on the article, they hate finance even more (at 23%, versus 17% for tech). Pissing off both of those industries doesn't seem like the smartest approach when they have 12 million sq. ft. of unused office space [0]. I think SF's pain is only beginning. [0] - https://socketsite.com/archives/2020/10/nearly-12-million-square-feet-of-vacant-office-space-in-s-f.html https://socketsite.com/archives/2020/10/nearly-12-million-sq...
• dave_aiello 6y ago
  Doesn't this type of tax violate the Equal Protection Clause of the Fourteenth Amendment to The Constitution, https://en.wikipedia.org/wiki/Equal_Protection_Clause https://en.wikipedia.org/wiki/Equal_Protection_Clause?
  • RangerScience 6y ago
    IMO that's the same question as 'does a progressive tax violate the 14th'; here's a Quora: https://www.quora.com/Does-the-federal-government-violate-the-14th-amendment-by-taxing-individuals-at-different-rates https://www.quora.com/Does-the-federal-government-violate-th...
• tschellenbach 6y ago
  City that depends on high paid tech workers to pay for their inefficient public sector approves law to encourage those tech workers to leave...
• offtop5 6y ago
  Feels like a great way to encourage companies to leave the state. I left California many years ago. Every single part of my life is much better. Fiscally , romantically, mentally. SF over values how essential location is. With Covid it's clear remote work is the future, base the company out of Delaware and go full remote
  • dragonwriter 6y ago
    > Feels like a great way to encourage companies to leave the state. Well, leave the City and County of San Francisco, maybe. But it wasn't that long ago that SF proper wasn't even considered part of Silicon Valley and the associated tech hub, anyway, though it was close enough that a lot of the conferences, etc., were there. And most of the big SV firms still aren't actually in SF.
  • bambax 6y ago
    This is the eternal objection to measures like this. But if every city and every state implement this, where will they go? And even if not, will they actually move? Will companies move? Time will tell but it seems very doubtful.
    • mrits 6y ago
      Most cities are giving incentives to grow. The exact opposite of what SF is doing.
    • forest_dweller 6y ago
      > This is the eternal objection to measures like this. But if every city and every state implement this, where will they go? To another country. The world is a big place, there are also a number of tax havens that are relics of the British Empire, there will be other countries which will quite happily have large tech business move there. None of these measures have the intended consequence (usually the opposite happens). All it ever does it make it look like the politicians are doing something.
      • toyg 6y ago
• Hydraulix989 6y ago
  Don't CEOs only take $1 in salary anyways to keep their income taxes as low as possible and optimize for long-term capital gains through stock compensation instead?
  • knappe 6y ago
    Please at least try and read the article before commenting. "Under the measure, gross receipts and CEO compensation will include money made from stock options, bonuses, tax refunds, and property, a caveat seen by many as a way to target the tech sector where CEOs are often compensated in non-salaried bonuses."
    • diebeforei485 6y ago
      It's still a valid point that stock-based compensation is not easy to compute. RSU's might be, but options are not.
• suyash 6y ago
  How do they determine that, does the CEO has to be a SF resident or the company's HQ has to be SF based?
  • diebeforei485 6y ago
    Neither. It's just the CEO's compensation (no idea how they compute this, given global exchange rates and stock options) vs the median pay of SF-based employees.
• stlava 6y ago
  I doubt the city will see a penny from this. There's nothing in place to do an audit to figure out who should be taxed.
• sna1l 6y ago
  The cynical side of me thinks that exec pay packages will just change to workaround this tax. For example, an exec's pay will be capped at 100x median worker salary, but just spread out across multiple years. As others have mentioned, temp agencies/contractors will also probably be utilized.
• kinkrtyavimoodh 6y ago
  It will work out well fiscally because giant companies will suck it up and pay, but it looks like a bad strategy from a forward-looking point of view. You want to incentivize future growth too, and you want to make sure that 20 years down the line, you have the new FAANGs of the world giving you millions in tax dollars, because history has shown that the largest of companies can eventually die out, and tech is full of graveyards. What this does is, it collects money from today's FAANGs while disincentivizing future startups from starting here. This is akin to the boiling frog fable (yes I know it's fake but the point of the fable stands), except the city is the one putting itself in the cauldron and raising the temperature by chipping away bit by bit the things that make the bay area a good place to live and invest in.
  • xg15 6y ago
    So they show do nothing about today's inequality because this will get them more taxes in 20 years? (Unless someone makes the same point 20 years in that they should better wait another 20 years)
    • nhumrich 6y ago
      OC didn't claim they should do nothing. He just said that this specific way was short-sided.
    • read_if_gay_ 6y ago
      Maybe a tax like this is not the only way to address inequality?
    • Consultant32452 6y ago
      One thing I'd like to see them do is radically simplify the ability for regular people to start regular businesses. One thing we could do is pick some small industry and run experiments with it. An example might be food trucks. There's a lot of regulations around these today. As a thought experiment we could eliminate all sales tax, special licensing, etc. for food truck companies under a certain size (We don't McDonalds food trucks to count). We could see what happened, is there wide spread food poisoning? Are families brought out of the lower class? It doesn't have to be food trucks exactly, that's just an industry that people like in a business that's relatively simple and imo has low systemic risk.
• shin_lao 6y ago
  This is such a smart thing to do in the middle of a pandemic that showed that distributed teams can work.
• mrits 6y ago
  With the way tax brackets work couldn't this result in a net loss of revenue for the city?
• ciarannolan 6y ago
  Brings to mind the last paragraph here (see my comment below for the ending): > By the time of Plato’s death (347 B.C.) his hostile analysis of Athenian democracy was approaching apparent confirmation by history. Athens recovered wealth, but this was now commercial rather than landed wealth; industrialists, merchants, and bankers were at the top of the reshuffled heap. The change produced a feverish struggle for money, a pleonexia, as the Greeks called it—an appetite for more and more. > The nouveaux riches (neoplutoi) built gaudy mansions, bedecked their women with costly robes and jewelry, spoiled them with dozens of servants, rivaled one another in the feasts with which they regaled their guests. The gap between the rich and the poor widened; Athens was divided, as Plato put it, into “two cities:… one the city of the poor, the other of the rich, the one at war with the other. The poor schemed to despoil the rich by legislation, taxation, and revolution; the rich organized themselves for protection against the poor. The members of some oligarchic organizations, says Aristotle, took a solemn oath: “I will be an adversary of the people” (i.e., the commonalty), “and in the Council I will do it all the evil that I can." > "The rich have become so unsocial,” wrote Isocrates about 366 B.C., “that those who own property had rather throw their possessions into the sea than lend aid to the needy, while those who are in poorer circumstances would less gladly find a treasure than seize the possessions of the rich.” > The poorer citizens captured control of the Assembly, and began to vote the money of the rich into the coffers of the state, for redistribution among the people through governmental enterprises and subsidies. The politicians strained their ingenuity to discover new sources of public revenue. In some cities the decentralizing of wealth was more direct: the debtors in Mytilene massacred their creditors en masse; the democrats of Argos fell upon the rich, killed hundreds of them, and confiscated their property. The moneyed families of otherwise hostile Greek states leagued themselves secretly for mutual aid against popular revolts. [1] Will Durant. “The Lessons of History.” p. 58-60
  • dpoochieni 6y ago
    How did the poor fare in the end?
    • ciarannolan 6y ago
      Sorry, didn't want to spam, but here is the last paragraph of that thought: > The middle classes, as well as the rich, began to distrust democracy as empowered envy, and the poor distrusted it as a sham equality of votes nullified by a gaping inequality of wealth. The rising bitterness of the class war left Greece internally as well as internationally divided when Philip of Macedon pounced down upon it in 338 B.C., and many rich Greeks welcomed his coming as preferable to revolution. Athenian democracy disappeared under Macedonian dictatorship. TLDR on this whole thing: this never ends well for the poor.
• nicolashahn 6y ago
  What happens when other cities want to do the same thing to large companies with a national footprint? Is Sundar Pichai going to have to pay 0.6% to every city Google operates in who wants in on this?
• m0zg 6y ago
  Brilliant idea: introduce a city tax in the middle of a pandemic which makes everyone work remotely from anywhere they want. Couldn't possibly backfire /s.
• gotoeleven 6y ago
  I'm glad to see San Francisco is deciding which voluntary arrangements among private citizens should be penalized. Their governance has been consistently Solomonic.
• baggy_trough 6y ago
  Otherwise known as the "fire your lowest paid San Francisco employees" bill.
• deleted 6y ago
  [deleted]
• sadfev 6y ago
  Honestly this not a bad move. It incentivizes the right behavior and the extra levy isn’t ludicrous. I am as libertarian as it comes but this looks like a proportionate response to pay disparity and a way to generate extra $$. That being said I am skeptical of it being very successful in either of its goals.
  • thrill 6y ago
    "libertarian as it comes" : "proportionate response" : "pay disparity" Wikipedia: "In modern politics, liberty is the state of being free within society from control or oppressive restrictions imposed by authority on one's way of life, behavior, or political views."
• cactus2093 6y ago
  "The tax will levy an extra 0.1% to 0.6% on gross receipts made in San Francisco" What counts as "made in San Francisco"? It doesn't seem like that definition would apply to online revenue for e.g. a SAAS company or social media site. It would still apply to some tech companies, those with a physical presence like Uber or AirBnb are more clear. So is Salesforce in the clear for this tax, or perhaps they are only taxed on the revenue that comes from sales to other businesses who are themselves in SF? (And what if those businesses have multiple offices?). Seems quite complex and probably pretty easy to get out of with some accounting tricks. I guess this is a progressive SF law that really isn't targeting tech companies, for once? On the other hand, it clearly will apply to every national chain retail store, restaurant, etc. And if so, all of their local mom-and-pop competitors will get a slight leg up from this in addition to raising the revenue from the tax. If I'm understanding this right I guess it might not be the worse idea.
• subsubzero 6y ago
  There are multiple issues as play with plenty of guilty parties: The city of SF: Its horribly run to put it mildly, it gets an absolute fortune from taxes and the money "disappears". See the myriad homeless everywhere, think why doesn't the city spend any money on fixing the problem? They do, they spend 300M dollars a year on the homeless [1]. Lets talk about their budget, 13.7B[2], yes that Billion for a city with 883k residents. Looking elsewhere in CA at San Diego with has 1.3M residents, it has a budget of 4.3B[3] and although there are homeless in SD its not an apocalyptic scene like SF is. Tech Companies: Having a huge number of offices in SF with everyone making 2-4x what an average family makes in a year in the US is going to bring in some serious money. While its fine they make that much, what is not is having a extreme concentration of companies that can run their business anywhere in the US or World. With Covid we are seeing record numbers leaving the city as they are no longer shackled to the SF offices. Residents: Alot of SF housing owners are extremely resistant to building(as more housing supply reduces their home value). There is a fierce nimby movement that would like nothing more but to halt all development in the city as it changes the 'character' of the city[4]. Strict zoning/environment laws: These laws are typically voted in by alot of residents but some have been around a long time and plague california stifling development and housing. A very long read article that goes into depth can be found here - https://techcrunch.com/2014/11/02/so-you-want-to-fix-the-housing-crisis/ https://techcrunch.com/2014/11/02/so-you-want-to-fix-the-hou... Summary: Add an incompetent local govt. mix in a huge influx of wealth and a splash of laws that stifle housing development in a city bound by 3 sides by water and you get the disaster that SF is. [1] - https://townhall.com/tipsheet/timothymeads/2019/05/18/san-francisco-homeless-rises-17-after-city-spends-300-million-annually-to-solve-problem-n2546530 https://townhall.com/tipsheet/timothymeads/2019/05/18/san-fr... [2] - https://sfmayor.org/sites/default/files/CSF_Proposed_Budget_Book_July_2020_LR_Web_REV2.pdf https://sfmayor.org/sites/default/files/CSF_Proposed_Budget_... [3] - https://www.sandiego.gov/sites/default/files/legacy/iba/pdf/bpguide.pdf https://www.sandiego.gov/sites/default/files/legacy/iba/pdf/... [4] - https://reason.com/2018/01/05/nimbyism-in-san-francisco-reaches-new-he/ https://reason.com/2018/01/05/nimbyism-in-san-francisco-reac...
• xyst 6y ago
  SF and Cali in general just love to chase businesses out of their state.
• mlindner 6y ago
  Every CEO will just move out of San Francisco city limits... This doesn't really do anything.
• julienb_sea 6y ago
  This is a strange bill. It targets companies based on the delta between CEO compensation and median worker. This means companies that have larger workforces - mostly determined by industry - are less likely to set up shop in San Francisco. Of those that do, they are strongly incentivized to use contractors instead of employees to ensure the salary gap is within reason. In other words this just created an arbitrary set of incentives for companies to adjust their behavior, likely to the detriment of non-high income workers in the city.
• rattray 6y ago
  I actually think things like this might be really good for the business culture of San Francisco. For a while, SF was a popular place to start a new company, but all established CA tech firms were down on the peninsula or in the south bay. Some of those startups got big, and some of the big firms opened SF offices to compete for talent. Now, it's hard to compete for talent in SF if you're starting out - you have to compete with the Ubers and Airbnb's as well as Google and FB. Taxes like this will push more of "big tech" out of the city (eg Stripe moving to South San Francisco) and free up more breathing room for young startups. I guess I take it as a given that this is better for SF, but others may disagree or need convincing.
• jefftk 6y ago
  Text of the measure: https://sfelections.sfgov.org/sites/default/files/Documents/candidates/2020Nov/200629_ExecutivePay_LT.pdf https://sfelections.sfgov.org/sites/default/files/Documents/... Note that it's "highest paid managerial employee" and not "CEO" or "highest paid executive".
• harikb 6y ago
  > on gross receipts made in San Francisco How much does this really apply to SF tech companies?
• GhostVII 6y ago
  San Francisco's solution to everything seems to be to just keep raising taxes, and throwing money at things which don't work. At some point you have to realize that more money isn't always the solution, you actually have to fix your beurocracy. It's insane to me that the city with so many rich people and incredibly valuable companies is such a mess, your telling me that a small city with an incredibly wealthy population can't figure out how to keep the tenderloin from being full of tents and open drug use? Or get some form of functioning public transit? Pretty pathetic.
  • burlesona 6y ago
    It's much harder to repeal laws, remove committees, stop wasteful procedures etc. than it is to introduce those things. This is a big problem at all levels of government, but particularly in California where the voters can (and do) directly create policies and programs via propositions. If we were half as good at removing unhelpful laws and programs as we were at creating them, we'd all be a lot happier.
  • dheera 6y ago
    > a small city with an incredibly wealthy population can't figure out how to keep the tenderloin from being full of tents and open drug use? The wealthy people avoid walking through the Tenderloin. They spend their time in the Battery and the Modernist. They have no incentive to fix the situation there. None. Zero. This isn't Europe where wealthy people enjoy a stroll downtown, and have some incentive to want to keep their downtown nice. The wealthy people in SF just go to Napa and take their stroll in a vineyard over there instead. > Or get some form of functioning public transit? The wealthy people don't use public transit, they just drive everywhere or Uber everywhere. Again, they have zero incentive. To be clear, I really want these issues to be fixed, just stating the facts of the situation.
    • jelliclesfarm 6y ago
      It is understandable that you want these issues fixed. But do you think those who don’t use these services should be burdened with the cost of fixing them? In Europe, social costs are borne by the middle class to provide a safety net for the middle class. In the USA, we expect the wealthy to provide for all of society. It is highly irrational.
• MattGaiser 6y ago
  So lay off all non professional workers and replace them with temps and contractors?
• gnicholas 6y ago
  Remote work wasn't as big of a thing when this was drafted, but it will be interesting to see how it plays out as SF-based tech workers relocate to lower cost of living parts of the country/world. Some companies have already said that they will reduce pay of employees who relocate, which affect the way that the average pay vs CEO pay shakes out.
• gnicholas 6y ago
  This appears to just target salaries, not SBC. [1] Considering how large a role SBC plays in executive comp, it seems like this law will not be as impactful as if it looked at total comp. Am I reading this incorrectly? I would note that it would be difficult to assess the FMV of different SBC for the purposes of these calculations. For example, engineers might get RSUs, and the CEO might get options with a particular strike price, or different amounts of RSUs based on hitting revenue/profitability targets. It wouldn't be simple to value each of these things a priori, and companies wouldn't just accept whatever value the SF govt employees come up if it means huge amounts of additional tax. 1: https://ballotpedia.org/San_Francisco,_California,_Proposition_L,_Business_Tax_(November_2020) https://ballotpedia.org/San_Francisco,_California,_Propositi...
• jcims 6y ago
  Agree with it or not, at least this will add some data to the discussion. I have a feeling the result will be somewhere in the middle of the speculation and have both good and bad consequences that weren’t intended.
• huevosabio 6y ago
  Sigh... more ill-thought "policies" voted as propositions. I wonder, when will the balance change such that it no longer makes sense for any relevant company to be based off of San Francisco. I wonder, how many bad regulations does San Francisco have to come up with before it finds itself in Detroit's shoes? It is harder for San Francisco, since the weather here is phenomenal, but not impossible.
• deleted 6y ago
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• ag56 6y ago
  A lot of people here misinterpreting the CEO tax —- it applies to revenue made within San Francisco, and is not dependent on the location of the company. So no, it should not impact the decision of a founder to base their company in SF. The doubling of transfer tax on property over $10m however... that has a very real impact on a founder who has already made some money.
• deleted 6y ago
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• ur-whale 6y ago
  https://archive.is/GlkGc https://archive.is/GlkGc
• smsm42 6y ago
  One thing I don't get - what's the point of having an office in SF now? (Almost) nobody is going to the office anymore, everyone switching to remove. All meetings are online. The city itself is dirty and unsafe and smelly. And you've got insane prices and taxes. What's the point of staying there? Is it just inertia? Is it too expensive to move?
• kumarski 6y ago
  I continue to accumulate stocks in companies that jettison their W2's for 1099 workers under the backdrop of "Work from home."
• darawk 6y ago
  Imagine being so incompetent that you think the solution to San Francisco's problems is a property transfer tax. Not a property tax. A transfer tax. Transfer taxes disincentivize transfers. What do we need more of in property constrained places like SF? Transfers. What a shockingly stupid policy.
• neilparikh 6y ago
  The fundamental problem is California is Prop 13. They can try to patch it up however they want these one off measures, but until you address the massive amount of wealth extraction going on by the landed class, all these attempts for improvements will just flow right into land. This principle was discovered 200 years ago: > When there is no accessible rent-free land, any improvements in the condition of society, be they in the form of civilizational progress or local improvement, are recaptured in the form of higher land values, and the leftover wages after rent is paid will tend towards subsistence, as described by David Ricardo's Law of Rent. From https://en.wikipedia.org/wiki/Rack-rent https://en.wikipedia.org/wiki/Rack-rent
• deleted 6y ago
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• yashap 6y ago
  This is quite a small tax, even in the “worst” case (maxes out at 0.6%, if your top exec makes 600x the average employee). And it only impacts companies with massively overpaid executives - there’s no change for most companies, who have nowhere remotely close to a 100x discrepancy between top paid and average employees. In reality, this will create a bit of extra tax revenue, and push down SF exec salaries ever so slightly. Both good things. No company is moving out of SF, replacing their staff with contractors, etc. over such a tiny tax. It’s a very small step in the right direction IMO.
• mancerayder 6y ago
  This is where I'm legitimately confused: the city is an expensive city, land prices are high and housing is expensive, rent is high and so forth. We're told that that is the major problem, and the major reason for the homelessness issue of SF (mentioned many times below in this thread by numerous commenters). But other cities have lower land prices and cheaper housing. San Francisco has the highest land and rent prices of the entire country. The argument that "we need to lower the price of housing to address the homeless problem" sounds very appealing, until you consider: wait, why are they going there? The indications are that they're not from there. Is the problem that they're coming from places that don't have social programs, and drug legalization, which SF kind of has? There are needle exchange programs and if you start to convulse in the street someone will run over right away and give you Narcan. There's free food. Showers and bathrooms are ... apparently a problem ... but it's warm out. It's not Chicago in winter. So maybe it just make sense for homeless to hang out in Tenderloin. As in, if a magic wand made us homeless, we'd just logically go there because it'd be good and healthy for us to do that. Going back to the article. Someone mentioned the Laffer Curve: if you tax the rich to get revenue, they'll leave and you'll get less revenue. Well maybe there's another curve: if you make it extremely comfortable and desirable for homeless people in order to solve the homeless problem, you'll have a bigger and bigger homeless problem? Maybe the problem isn't "high land prices" in San Francisco. Or even, "inequality." Maybe the issue is that the rest of the state / country don't have the same degree and quality of social programs and drug legalization as SF, and so SF is a natural place to go.
• RickJWagner 6y ago
  I'd like to see Los Angeles do the same thing for highly compensated entertainers. If they make more than a multiple vs. average service worker, tax them.
• cs702 6y ago
  Barring federal help, it's possible, or even likely, that we will see greater taxation in many local jurisdictions (cities, counties, states) in coming months, because they are close to running out of cash as a result of the pandemic's impact on tax collections. The Wall Street Journal recently published a good summary of the potential cash crisis at https://www.wsj.com/articles/u-s-states-face-biggest-cash-crisis-since-the-great-depression-11603910750 https://www.wsj.com/articles/u-s-states-face-biggest-cash-cr... Quoting from the article: "US States Face Biggest Cash Crisis Since the Great Depression: The drop in tax revenue has led to a total shortfall expected in the hundreds of billions of dollars—greater than 2019’s K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure."
• diogenescynic 6y ago
  I lived in SF from 2009 to 2019 and just moved out of the Bay Area entirely. SF is about to kill its golden goose. Tech companies don't have to be in SF Bay Area anymore and now that there's a mass exodus fleeing the area due to cost of living and quality of life, SF government is going to hit a massive budget crunch. It'll be interesting to see how it plays out. Chesa Boudin and the rest of the ideological extremists who sabotaged the city will finally get what they wanted.
• racl101 6y ago
  That will get the human poop off the sidewalks.
• philyg 6y ago
  To those who say it will disincentivise companies from new companies being found in SF: Perhaps we are in a situation where CEOs expect to be paid 100 times more than the median pay but this should not be so. In what world is this uneven distribution fair? Legislation more frequently should be bold like this and aim to create a world that is better as opposed to being dictated by immediate side effects. Perhaps it will take a long time for this legislation to become nationwide and perhaps fewer startups will be created in SF, but someone should lead the way in trying to create a fairer world. If companies wish to renumerate their CEOs more highly they should do so by also increasing the pay of the rest of their workers as this piece of legislation encourages. Sharing the benefits of good performance with the employees may have positive flow on effects as employees may feel rewarded for their positive work and consequently feel more motivated to continue working hard. Additionally it increases the sense of fairness and trust in the economic system and perhaps in society as well as more people that work hard reap the benefits of their work. Overall this of legislation in my opinion is a good first step towards making employee owned businesses a more widely adopted model and creating a more equitable economic system. EDIT: discouraging excessive payouts to CEOs, encourages directing that capital back into the company. Large corporate payouts do take away money that the company generated (not only the CEO) and I think this legislation recognises that CEOs also need to be held more accountable (in terms of renumeration) to the companies they lead as large renumeration is not always in the company's best interest (even when performing well)
• nogabebop23 6y ago
  "dismisses fears that the surcharge will drive companies out of the city, saying the tax is modest in comparison to the cost of moving a business." ...until it's not. Amazon has shown us there are lots of attractive jurisdictions ready to shower companies with tax incentives to relocate; SF feels like a city that's enjoyed the benefits of many factors not directly of their making and they could be in for a strict reckoning. We will see...
  • vharuck 6y ago
    What I took away from the Amazon pageant was that companies choose locations mostly by access to natural or social resources (educated workers, in Amazon's case). Same as always. But big companies can humor more towns to gin up bidding wars.
• artaak 6y ago
  And where exactly these taxes will go? From pockets of CEOs to pockets of ... municipal bureaucrats, whose median salary floats at a humble mark of 175K/year? https://www.city-journal.org/san-franciscos-municipal-budget https://www.city-journal.org/san-franciscos-municipal-budget
  • 0goel0 6y ago
    If you spent time reading the article instead of leaving lies, maybe you'd know: > The CEO tax is expected to generate between $60 million to $140 million per year. Haney said he wants most of the money directed towards health services.
    • artaak 6y ago
      Where exactly I “leave lies”? That’s a serious allegation and is thrown very casually here, as if it is self-obvious. What he says and what will actually happen is two different things, especially in politics. If you have actually examined the URL I’ve posted, you might (maybe?) realize that money isn’t exactly the problem in the SF municipal budget. Maybe it is something else, like ehm.. actual governance?
• someonehere 6y ago
  Some of these city measures are carefully created to funnel money into the general fund. Our Prop I says it’s for something, but the board of supervisor who’s pushing the idea admitted there’s no guarantee the funds will go to what it was put on the ballot for. The money from Prop I will go into the general fund. Why is this important? The city has a huge pension liability they’re not able to renegotiate and keep from obligations to keep paying it. The city’s budget for next year is somewhere near $13b. Yes billion. For a city of 800k, our budget is $13b.
• fedd 6y ago
  How is it even working? How a city is going to tax a company registered in, say, Delaware? What if every municipality in the world decide to tax every company created everywhere? The article mentions another city where it's working - Portland, afair. How's it possible?
• austincheney 6y ago
  Several of the comments here entertain the idea you can get wealthy in the Bay Area working working for an established company, not equity. I have never understood the math. Let’s say you earn an outrageous salary working for a FAANG of about $450,000. That is about 3x the equivalent where I live for the same work but taxes are substantially higher and housing costs 6-10x. Numerically it doesn’t make any sense when the current value of my house (after doubling in value) is barely the downpayment of a house in the valley. Apartments are also ridiculously expensive and I would want to live in a tiny apartment with kids (my own, not roommates). Then the other argument is that the valley is where the jobs are. My experience is that if you are an experienced and half competent software engineer there are plenty of jobs in every major metro. So if I already have a high paying job and own real estate what is the pull to move to the Bay Area?
• bulavard 6y ago
  CEO pays self $1 salary and a ton of stock options. CEO is now the lowest paid employee in the company. Problem solved.
• ARandomerDude 6y ago
  "They" is third person, plural, subjective in English.
  • frank2 6y ago
    The usual term for the thing you call "subjective" is "the nominative case".
  • jamienicol 6y ago
    "They" is perfectly valid referring to a singular person. > Used to refer to the one previously mentioned or implied, especially as a substitute for generic he.
  • antihero 6y ago
    Imagine patronisingly correcting someone's grammar only to be completely wrong.
• Closi 6y ago
  > Critics call the surcharge a blatant attempt at redistribution of wealth. Said with zero irony, as if this is the worst thing ever.
• Wheaties466 6y ago
  Based on the title I expected to be more offended. But it seems like a reasonable percentage to encourage wage equality.
• notSupplied 6y ago
  It pains me to see that well-meaning people fail to do a basic pass on 2nd order effects of this tax: - Since "high CEO pay" is defined as 100x multiple of average pay, the first unintended incentive is for companies to cut back on hiring low-end labor, or 1099/outsource so that they do not drag down the average pay. This directly harms the employment prospects of people at the bottom. - If it succeeds in reducing CEO pay, it's not clear that the money is redistributed to other employees, as opposed retained to by the company as capital, or returned to shareholders. And not that this matters much. Even if you were to redistribute, say Bobby Kottick's $30M compensation, it would result in a net-gain of ~$270 per month per employee at Activision. That is assuming the CEO's pay goes to ZERO. If this tax only results in a net -10% change in CEO pay, it's actual economic benefit to other workers is a rounding error. - This arbitrarily favors companies of certain structure vs others. For example, a VC firm or Law firm has an extremely high average pay, while any operation that likely involves "real economy" employs a legion of low-pay workers. The CEO of a large, meat-and-potatoes kind of operation is far more likely to be dinged by the 100x rule than the head of a high end professional partnership. Why are VC firms special in the eyes of this law?
• amadeuspagel 6y ago
  > Under a newly approved law, any company whose top executive earns 100 times more than its average worker will pay an extra 0.1% surcharge on its annual business-tax payment. This is a great way to incentivize CEOs to fire their lowest paid workers, outsource parts of the business that involve low-skilled labor.