By Lisa Nagele-Piazza, J.D., SHRM-SCP
November 9, 2020 - SHRM
San Francisco voters approved a tax on businesses that pay their chief executive officer (CEO) or "highest-paid managerial employee" well above the median salary for the rest of their employees.
The amount due will depend on how much more the CEO earns. If a company's top earner makes 100 times more than the company's average worker, the business will have to pay a 0.1% surcharge on its annual business tax payment. If a CEO makes 200 times more, the company will pay 0.2%. If a CEO makes 300 times more, the company will pay 0.3%. The tax will be capped at 0.6%.
We've rounded up resources and articles from SHRM Online and other trusted outlets on the news.
Addressing Economic Disparity
The new law aims to address the economic disparities that have been in the spotlight since the coronavirus pandemic began. San Francisco voters showed that they "are concerned about growing economic inequality," said Matt Haney, the city supervisor who authored the measure. Voters also approved other business tax increases, including a higher tax rate for many tech companies in the area.
First Tax of its Kind
Voters approved the measure by more than 65 percent, and San Francisco will now be the first U.S. city to tax private and public businesses based on how much more their top executive earns than other employees. The measure is expected to produce between $60 million and $140 million annually, beginning in 2022, and Haney said he wants the tax to fund health services.
Supporters Say Wealth Should Be Shared
Proponents of the new rule say that wealth in the city should be shared with workers and "[c]orporations can avoid the tax by simply paying their executives less or by raising their employees' wages." Businesses could also avoid the tax by moving out of San Francisco or eliminating low-paid jobs in the city.
Opponents Criticize Raising Taxes During Pandemic
Opponents of the surcharge say that taxes shouldn't be raised during the COVID-19 pandemic while many businesses are struggling. Some businesses had to shut down, many tech employees left the city to work remotely from other locations and tourism numbers are low. "The middle of pandemic-fueled shutdown is the wrong time to raise taxes," said Jim Wunderman, president and CEO of Bay Area Council, a business advocacy group.
(ABC News)