The Way It Is Now: The City collects a tax on gross receipts (Gross Receipts Tax) from some businesses in San Francisco at a rate from 0.16% to 0.65% annually. Businesses with more than $1 billion in gross receipts, 1,000 employees nationwide and administrative offices in San Francisco pay an administrative office tax (Administrative Office Tax) based on their payroll expense instead of their gross receipts. This tax rate is 1.4% of their payroll expense.

State law limits the amount of revenue, including tax revenue, the City can spend each year. State law authorizes San Francisco voters to approve increases to this limit to last for four years.

The Proposal: Proposition L would place an additional tax on some businesses in San Francisco when their highest-paid managerial employee (Top Executive Pay) earns more than 100 times the median compensation paid to their employees in San Francisco (Employee Pay).

* For a business that pays the Gross Receipts Tax, if its Top Executive Pay is more than 100 times Employee Pay, the business would pay an additional tax from 0.1% to 0.6% of its San Francisco gross receipts.

* For a business that pays the Administrative Office Tax, if its Top Executive Pay is more than 100 times Employee Pay, the business would pay an additional tax from 0.4% to 2.4% of its San Francisco payroll expense.

Proposition L would also increase the limit on the City’s annual tax revenue spending by the amount of additional taxes collected under the proposed tax. The increased limit would last for four years.