Plan for CEO tax heading to S.F. ballot
Once again, the San Francisco Board of Supervisors is looking to squeeze more money out of the city’s high-flying corporations — including its prosperous tech companies — to help pay for the city’s most pressing problems.
The latest proposal headed for the November ballot would tax companies with highly paid CEOs — those earning at least 100 times the median income of their employees — to help pay for free mental health care for all San Franciscans.
Expected to land on the same ballot are two other measures that tap company coffers: a tax on newly public companies to raise money for job equality programs, and a tax on a portion of Uber and Lyft rides to fund the city’s transportation needs.
The bundle of ballot measures comes as the Board of Supervisors — the most progressive in recent history — increasingly blames prosperous companies for San Francisco’s most gripping problems, such as the homeless and affordability crises. It also comes less than a year after the city passed Proposition C, a measure that collects millions of dollars from big businesses for homeless services that cannot be spent because the tax is tied up in legal challenges from taxpayer advocates.
These measures are “exactly what the progressive politicians like to propose,” said
Jason McDaniel, an associate professor of political science at San Francisco State University. “It seems to be targeting an industry or a group that many people feel is a villain in the city and is making things worse.”
Supervisors Hillary Ronen and Matt Haney proposed the latest tax Tuesday — dubbed “the CEO tax” — to fund their ambitious plan to revamp the city’s mental health care system, which leaves an untold number of people without the therapists, psychiatrists and medications they may need. The proposal, called Mental Health SF, would provide free around-the-clock mental health care to all San Francisco residents, regardless of insurance status. City officials estimate such a plan would cost the city tens, if not hundreds, of millions of dollars to implement.
“Voters will have a clear choice before them in November: whether or not to fix our broken mental health care system so we can finally see a change on our streets,” Ronen told The Chronicle. “And whether or not they believe businesses can pay a little bit more to make that change possible.”
Current city tax rates on businesses vary between 0.1% to 0.6% of their gross receipts. Under the proposal, companies subject to the tax would pay an additional 0.1% to 0.6%. The tax would kick in if a company’s highest earner is paid at least 100 times more than the median wage of the company’s workers in San Francisco.
The city’s Department of Public Health spends about $400 million a year on mental health services. The CEO tax would be expected to raise from $60 million to $140 million annually, according to the city controller’s office.
Yet the public health department estimates that, as written, Mental Health SF would cost the city more than the CEO tax would raise: between $244 million and $1.1 billion annually, depending on how many San Franciscans use it. Creating the drop-in center alone could cost the city another $278 million.
The city’s Budget and Legislative Analyst Office has a lower estimate that doesn’t include the full scope of the proposal: at least $70 million a year.
Haney and Ronen said they will also tap state funds to pay for the program.
“We absolutely need additional funding to expand the number of beds and capacity, and to make sure that we have an adequate amount of treatment and not extensive bottlenecks in the system,” Haney said. “We’re committed to getting that revenue.”
Mental Health SF and the CEO tax will be presented to voters as two measures. If Mental Health SF passed and the CEO tax didn’t, the city could be locked into the expensive endeavor without guaranteed funding. If only the tax were approved, companies could still be on the hook to pay for “other mental health services,” as the ballot measure says, rather than for a specific plan.
Although the Board of Supervisors still needs to approve each of the three measures for the ballot, they are expected to do so by the end of July.
The CEO tax and the two other business tax measures would need to pass with at least two-thirds voter approval because each measure says the money would be spent on a specific purpose. Mental Health SF, on the other hand, would only need a simple majority to pass since it is an ordinance.
McDaniel, of San Francisco State, said he wouldn’t expect voters to reject the three tax measures just because they are aimed at businesses and tech — unless an opposition campaign sways them.
“Voters in San Francisco are generally pretty open to new tax measures,” he said. “Especially if it can be seen as targeting someone else.”
But the number of taxes targeting business and tech lately is a change from eight years ago, after the Great Recession, when the board — wooing such companies — passed measures intended to keep them in the city.
Jennifer Stojkovic, executive director of sf.citi — which represents a number of tech firms in the city, such as Airbnb, Uber and Lyft — says she is concerned about raising taxes in a well-healed city with a plush $12 billion budget. In particular, she said, she is wary of imposing taxes even as the city has seen no results from the recently passed tax on business for homeless services, Prop. C.
“No one wants to see tax dollars collected with no results,” she said, adding that the city should spend its mental health services budget more efficiently.
Companies that could be subject to the CEO tax include Comcast, Bank of America, JP Morgan and Chipotle, according to the city’s chief economist, Ted Egan, based on public information on CEO pay ratios.
According to a Chronicle analysis of Bloomberg data, other companies that could be impacted include Visa, Salesforce, Wells Fargo and Gap Inc. Large tech companies may not be subject to the tax as often as other industries because their San Francisco employees are well compensated.
Rodney Fong, CEO of the Chamber of Commerce, worries the tax could push more low-wage jobs out of San Francisco to lessen the gap between the highest paid and average workers.
“We need to incentivize companies to create more lower wage jobs in the city, not move them out of town,” Fong said.
But Haney defended the plan: “We need systemic change and we need some additional revenue to do it,” he said. “So we’re going to ask voters for both.”