San Francisco voters approved to tax big businesses with highly-paid CEOs to lessen the financial gap between top management and average workers made evident during the coronavirus pandemic.
The majority vote consisted of 65.18% of the total number of voters, Measure L revealed Tuesday night. The decision has made San Francisco the first U.S. city to tax both the private and public business sectors.
Supervisor Matt Haney introduced the idea, which received the board’s support. The new tax is expected to generate $60 million to $140 million annually in general funds beginning in 2022. Haney added he wished for the funds to be given to health services.
The measure would tax top executives if they were earning at least 100 times more than their average worker. The amount would start at a 0.1% surcharge of their annual business tax payments. If they made 200 times more, they would pay 0.2%, and so on, to a maximum of 0.6% tax, the Associated Press reported.
The President and CEO of the Bay Area Council, Jim Wunderman, said the new tax was implemented at the right time and in the right city. The measure targets only companies with more than $1.17 million worth of gross receipts. While the council and other business groups opposed implementing the tax, they did not fund the campaign.
The gross receipts would include finances acquired from stock options, bonuses, tax refunds, and properties owned. Many people believe that the factors allow the tax to target tech sector CEOs compensated in non-salary bonuses. Around 17% of tax revenues are expected to come from the tech sector, and about 23% from retail and financial firms.
Haney recommended the CEO tax as a way to solve the problem of economic inequality between the lower and higher classes without needing the state to impose an income tax. The measure was also implemented after the city has continued to take the top spot in income disparity, Mercury News reported.
Voters also approved several business tax changes that would have many tech companies paying a higher amount of tax while also increasing the transfer tax on property sales worth between $10 million and $25 million.
The San Francisco League of Pissed Off Voters, a group comprised of political individuals concerned with the city’s legislation, wrote in its voter guide that “We’re not gonna shed any tears if penthouse dwellers have to cough up.”
On Wednesday, Haney said that the approval of the new tax shows how San Francisco residents are well-aware of the disparity in income between top executives and average workers. The official said the coronavirus pandemic resulted in the rich getting richer while most workers either remained stagnant or lost finances.
While Haney said the tax was implemented to distribute the generated wealth within the city more evenly between its workers and residents, several critics said the new CEO tax was a brazen attempt to redistribute finances. They also slammed the increased business taxes while the coronavirus pandemic’s recession continues to ravage the economy.
The COVID-19 virus has caused several crucial elements of the city to close down since it began in March. San Francisco has seen fewer tourists, and the recession has forced workers in the tech, business, and financial districts to move out and transfer over to working remotely.
The CEO tax is comparable to a previous executive-pay surcharge passed almost four years ago in Portland, Oregon. Several years ago, San Francisco leaders had already considered the idea of implementing a CEO tax. In 2014, the California Legislature denied approval for a proposal that sought to lower company taxes whose executives earned less than 100 times their average workers.
Political consultant Jim Ross said that voters did not understand the necessity of taxing CEOs beforehand. But the recent recession brought by the pandemic made the gap between incomes more apparent as top executives are paid an obscenely large amount, ABC News reported.