Tie Executive Pay to Employee Pay for Tax Purposes

This local initiative proposes changes to business taxes based on a comparison of a top executive’s pay to the median employee’s pay. The goal is to encourage more equitable wealth distribution within large corporations headquartered or operating in San Francisco. Under the proposal, companies where the CEO-to-median-worker pay ratio exceeds 100:1 would face a surcharge on their annual gross receipts tax. The surcharge would scale in tiers, with ratios above 200:1 triggering a higher rate and ratios above 600:1 triggering the maximum rate. San Francisco previously enacted a similar CEO pay ratio tax in 2020 under Proposition L, which passed with roughly 65 percent of the vote. Proponents argue that the existing measure’s rates are too modest to meaningfully influence corporate compensation decisions and that an updated structure would generate an estimated $60 to $140 million in additional annual revenue. That revenue would be directed to workforce development programs, affordable housing, and public transit improvements within the city. The San Francisco Chamber of Commerce and several tech industry groups oppose the measure, contending that it would drive employers to relocate operations outside city limits. Opponents also argue that pay ratio calculations can be misleading for companies with large part-time or contract workforces, and that the tax penalizes firms regardless of whether their median wages are already above market rate. The initiative includes an exemption for businesses with fewer than 100 employees and nonprofit organizations. If approved, the measure would take effect for the 2026 tax year, with the Office of the Treasurer and Tax Collector responsible for enforcement and annual reporting on compliance rates. Similar pay ratio disclosure requirements exist at the federal level under the Dodd-Frank Act, though no federal tax consequences are currently attached to the ratios.