Plans call for IPO tax to be on S.F. ballot in ’20

Supervisor Gordon Mar plans to pull a proposed tax on stockbased compensation — dubbed the IPO tax — from the November ballot and will instead put a similar business tax on the November 2020 ballot.

The ballot measure would have taxed companies that recently entered the public markets, such as Uber, Lyft and Pinterest. Mar originally wanted the measure on the upcoming ballot so the city could collect taxes from the newly public companies as their employees cashed out their stock options.

By postponing the tax measure, the city could miss out on collecting revenue from the recent wave of giant IPOs.

“We will be losing some of the nearterm revenue in making this move,” said Edward Wright, Mar’s legislative aide. “But alongside the urgency of the IPOs that are happening now, we are fo

cused on the urgency in the overall crisis of our city's economic inequality.”

Mar’s original proposal, which would have levied an additional 1.12% payroll tax on stockbased compensation, would have been dedicated toward programs that address income inequality.

The money raised from the new measure, which he plans to propose in the coming weeks and would include taxing stockbased compensation, would go toward the general fund.

That means the measure would only need a simple majority to pass, rather than a twothirds vote.

Mar’s decision to withdraw his tax measure follows the news last week that Supervisors Matt Haney and Hillary Ronen are pulling their proposed tax from the ballot. That plan would have taxed companies whose CEOs earn at least 100 times the median income of their employees to help pay for free mental health care for all San Franciscans. Under a deal with Mayor London Breed, the supervisors axed their plan to focus on a unified, coordinated proposal for a future ballot.

All these piecemeal tax proposals had worried some city officials. In response, in early July, Breed and Board of Supervisors President Norman Yee asked for a major review of the city’s business taxes. Over the next few months, City Controller Ben Rosenfield will analyze those taxes.

The goal of the overhaul is to make the system fairer and simpler, and potentially bring in more revenue.

At the time, Mar told The Chronicle in early July that he supported a broad analysis of the city’s business taxes, but didn’t plan to pull back his measure until after Rosenfield’s report was completed.

Mar said his tax on tech companies reaping windfalls from IPO’s “complements this effort to ensure our tax system is just, equitable and meets our city’s needs.”

But after remaining steadfast on the measure going before voters in November, Mar switched his position Wednesday and said it “became clear the stockcompensation tax should be one part of a broader strategy” and is “not itself a comprehensive solution.”

Ahead of his new proposal, Mar said he will create a working group called the Shared Prosperity Coalition to review and recommend broader tax reforms in the city — beyond what he and his colleagues already have proposed.

The tech industry has spawned a number of public companies this year — putting 2019 on track to be the biggest year for initial public offerings in recent history. Earlier this year, San Francisco’s Chief Economist Ted Egan estimated that the Lyft, Pinterest and Uber IPOs could lead to a 0.5% to 1.9% increase in the city’s housing prices.

Egan said Mar’s tax could raise the cost of hiring employees at companies that compensate with stock. As a result, that could discourage certain companies from starting and growing in San Francisco.

Critics of the measure, such as the Chamber of Commerce, also worried that it could affect a broader set of businesses beyond wealthy tech companies.

The Chamber’s CEO, Rodney Fong, called Mar’s tax an “illthought and clumsy ballot measure.”

“We hope Supervisor Mar will learn from his missteps and engage with the business community if he revisits this legislation in the future,” Fong said.

“We will be losing some of the nearterm revenue in making this move. But alongside the urgency of the IPOs that are happening now, we are focused on the urgency in the overall crisis of our city's economic inequality.” Edward Wright, Supervisor Gordon Mar’s legislative aide