Two dueling business tax measures in San Francisco — Propositions C and D — are both lagging behind the necessary majority each needs in order to pass, early results showed Tuesday night.
Prop D, or the “Overpaid CEO Salary Tax,” proposes to increase tax rates of large businesses and corporations through changing the city’s tax structure as a way to increase revenue for the city. As of 10:45 p.m., 55% of ballots counted have rejected Prop D.
Prop C is a competing measure that was drawn up as a way to try and defeat Prop D. It proposes reducing tax rates for small and medium-sized businesses by increasing the exemption ceiling for the Gross Receipts Tax. Voters have voiced stronger opposition to Prop C than Prop D, with around 64% voting against Prop C.
Because Propositions D and C are competing measures, the one with the most votes will go into effect in the event that both are passed by voters. But so far, both measures have a long way to go in order to pass.
The city currently collects a Top Executive Pay Tax from businesses when their highest-paid employee earns more than 100 times the median salary paid to their San Francisco employees. That tax rate increases based on how much the top executive’s pay exceeds that of its San Francisco employees.
Prop D would alter the Top Executive Pay Tax by calculating the rate to include the median income of all employees, not just those in San Francisco. The measure also proposes to add more gross receipts taxes and administrative taxes on businesses that are subject to the Top Executive Pay Tax.
Opponents of Prop D have argued that Prop D will push large businesses out of San Francisco and result in layoffs of employees since those subject to the tax hikes will have to pay larger rates. Supporters say that the extra revenue generated through the tax could help close the city’s budget deficit.
Some opponents of Prop D have backed Prop C, a competing measure to reduce tax rates for small and medium-sized businesses by increasing the exemption ceiling for the Gross Receipts Tax.
Currently, most businesses with gross receipts of up to $5 million are exempt from paying the Gross Receipts Tax, but Prop C would raise the threshold to $7.5 million. Prop C also proposed to accelerate the Top Executive Pay Tax by applying the scheduled 2028 rate increase in the existing tax to the year 2027.
Prop C proponents argued that the measure will reduce financial strain on small businesses, but those against it say it was only created as a way to defeat Prop D.
Both races raised millions of dollars in campaign donations, with labor unions backing Prop D and major corporations and several CEOs pouring in funding to Prop C.
On Wednesday, the San Francisco Department of Elections will announce how many more ballots need to be tallied.
