A San Francisco proposal could tax tech giants an annual surcharge if their 'overpaid' CEOs make 200 times the salary of average employees

• A proposed ballot measure would tax large companies in San Francisco whose high-earning executives make exorbitantly more than their average workers.
• For example, if a CEO makes 200 times more than the median employee, a 0.2% surcharge would be added to the firm's annual business tax payment.
• Small businesses would be exempt, and tech companies and their wealthy CEOs could be among the firms that qualify for the tax.
• Dubbed the "Overpaid Executive Tax," city leaders estimate it could raise up to $140 million a year that could be funneled into boosting the city's healthcare system during the COVID-19 pandemic.
• The tax could also impact the city's striking wealth disparity that has been exacerbated in part by the booming tech world and its high salaries.

A San Francisco ballot measure introduced Wednesday would tax large companies in the city that earn at least $1.7 million in annual gross receipts and whose CEOs make much higher salaries than employees.

The measure, put forward by Supervisor Matt Haney, is dubbed the "Overpaid Executive Tax." The higher the wage inequity between the CEO and the company's average workers, the higher the surcharge. So large firms that pay their executives 100 times more than their median workers would have a 0.1% tax. If a CEO's salary is 200 times more than the average workers at the company, the surcharge would be 0.2%.

As The San Francisco Chronicle reports, stock options that are typically doled out in the tech world would count as compensation, which would qualify those companies for the tax.

A spokesperson from Haney's office confirmed to Business Insider in an email that the tax would apply to any large company engaging in business in the city of San Francisco, whether or not they are incorporated in the city. That could include tech giants that call San Francisco home — including Salesforce, Twitter, Square, and Uber — and their high-earning executives.

But as the Chronicle notes, some tech companies that pay their employees somewhat more equal salaries regardless of ranking would be exempt since the ratio of high-earning execs to average workers would be lower.

The surcharge is designed to potentially save hundreds of healthcare jobs and improve public health for vulnerable residents as the city continues to stave off the spread of COVID-19. Haney wrote in a Twitter post that the tax could raise up to $140 million a year during a time when San Francisco faces a $2 billion budget deficit in light of the economic fallout driven by the COVID-19 pandemic.

The measure will be on the November 2020 ballot and would only apply to large corporations, not small businesses, starting in 2022 if it passes with a simple majority. A similar tax is in place in Portland, Oregon.

The surcharge would also potentially impact San Francisco's glaring wealth disparity exacerbated by sky-high salaries found in the lucrative tech industry. The city's middle class has shrunk, and a homelessness crisis has gripped the city as lower-income residents have been pushed out of the competitively priced housing market.

This isn't the first time the city has attempted to tax large tech corporations in San Francisco. A so-called IPO tax was proposed in mid-2019 that would raise the tax on stock compensation when companies go public. The measure was tabled.

And then there was the controversial Proposition C, colloquially known as Prop C, that proposed taxing the city's largest firms and funneling the money into efforts to fight the homelessness crisis. Most of the big-name tech companies opposed the measure, including Twitter and Square, Stripe, and Zygna. But execs like Salesforce's Marc Benioff and Cisco's Chuck Robbins were in support of it.