This needs to be the Year of Fighting Economic Inequality in San Francisco, and finding ways to get new revenue from the wealthy to pay for public services is a big part of that agenda. We’ve talked a bit about some ideas that might make sense for the city, but I’ve come across another one – and it has great potential for this city.

Portland is taxing companies that overpay their CEOs -- and using the money for homeless services
Portland is taxing companies that overpay their CEOs — and using the money for homeless services

Portland recently passed a law raising business taxes on companies that pay their CEOs more than 100 times the median wage of their employees. It’s a modest amount of revenue for that town – probably only a few million a year, which will go directly to services for homeless people. For a lot of people, it’s an important policy statement: City Commissioner Steve Novick called the plan “a tax on inequality itself,” and cited the work of Thomas Piketty, author of Capital in the 21st Century, perhaps the most ambitious economic analysis of the failures of the capitalist system since a guy name Marx took on that task 150 years ago.

Piketty thinks the Portland threshold is too low, and so do I: In the days when the US economy had far less income inequality, CEOs rarely made more than 20 or 30 times the salary of the median worker. (I’m glad to see the French economist weighing in on this; his book, while dense, is brilliant as far as it goes, but is a lot better at pointing out the problems than offering solutions.)

So maybe we look at the Portland ordinance as a starting point, and see if San Francisco can craft a law that not only brings in a lot more money, but makes and even stronger statement.

And, oddly, some tech firms might be just fine with that.

Portland found more than 500 publicly-traded companies doing business in the city. There are more in San Francisco. The SEC recently enacted rules requiring companies to report the ratio of CEO pay to median worker pay, and by next year, when all of the 2016 proxy reports are filed, we’ll start to see data that can be used to enforce that tax.

Meanwhile, it’s not too hard to figure out who would have to pay.

I spent a couple of hours browsing SEC reports on publicly traded companies that do business (or have their HQ) in San Francisco, and if we could craft a tax program that hiked the levies on firms with overpaid CEOs, we’d have plenty of payers.

Salesforce CEO Mark Benioff, for example, made about $33 million last year. It’s a company that pays well – but I doubt the median salary is $330,000. (Remember, the law says “median,” not average – the fact that another half-dozen top execs make more than $10 million at Salesforce doesn’t matter.)

Related article  The Agenda, Inauguration Week: How and where to protest Trump

Wells Fargo was founded here, and still does a lot of business in this town. (The bank is also in trouble for cheating its customers.) CEO John Stumpf, before he had to quit, made 130 times the median pay of his workers. Bank of America does business here, and last time I checked, was a city contractor; CEO Brian T. Moynihan reported $15 million of income in the bank’s most recent filing. The median BofA worker clearly doesn’t make $150,000.

Target has a store in San Francisco. Its CEO, Brian C. Cornell, made $16.9 million in 2015. Most of his line workers don’t make much above minimum wage. The CEO of Lowe’s made only 5.2 million last year – but the folks who work in his store on Bayshore Boulevard are not averaging $52,000 a year.

Now, there are exceptions: Facebook CEO Mark Zuckerberg took only $1 in pay last year (although his stock with worth a good bit more and he’s not missing any meals). Twitter CEO Jack Dorsey got no direct compensation in 2015 (but again, he has a huge fortune in company stock).

So those companies might not have to pay the surtax – at least, not the way it’s written in Portland. In the tech world, it’s not uncommon for CEOs who found a company to get more modest direct compensation, since their riches come from the value of the stock they own.

(We can tax that wealth by adding intangible assets to the property tax rolls. That would make Zuck’s $50 billion or so taxable; Twitter has more than $200 million worth of intangible assets, according to its SEC filings. We could also stop singling out the CEO and base the tax on the difference between the five highest-paid executives and the rest of the workforce.)

But let’s take Portland’s example and push it a bit further. Taxing companies that pay their CEO 100 times the median pay of their workers is nice; dropping that threshold to, say, 25 times might actually make a difference.

And Portland added a small surplus – ten percent for CEOs who make 100 times the median pay, 25 percent for those who make 250 percent. And that’s on the city’s 2.2 percent corporate income tax.

San Francisco can’t levy a corporate income tax; the state takes that authority for itself. So we do gross receipts (it used to be payroll). The current business tax varies by category (in fact, “information services” companies pay a lower tax than “scientific or technical services,” and it’s hard to figure out where the likes of Twitter and Facebook fit in. Sup. Eric Mar tried to add a “tech tax” last year, but his idea never got the support it deserved.)

Related article  Criminal justice and mental illness: What's SF's answer?

But the Portland idea doesn’t have to be based on an income tax. It can just be a surtax on what we already collect.

What if the city simply amended the gross receipts tax to add, say, a 50 percent surtax on all companies where the CEO made more than 25 times the salary of a median employee? Remember, this isn’t a 50 percent income tax; it’s a hike in the very modest existing tax.

The typical gross receipts tax of a financial-services company with revenue of more than $25 million in the city (say, Wells Fargo or BofA) is 0.56 percent.

So if Wells collected $50 million in receipts in the city last year, it would pay a grand total of $280,000 in local business taxes. (Which, by the way, is ridiculously low). Bump that up by 50 percent and the company’s paying an extra $140,000. Wells Fargo will not close up shop over that surtax.

But multiply that over all the companies that are engaging in active economic inequality and you start getting real cash.

I promise you, this will not impact very many small, locally owned businesses. There aren’t a lot of local merchants that make more than four times the median pay of their workers. Any anyone with gross receipts of less than $500,000 is normally exempt from the tax anyway.

It might very well hit big landlords and real-estate operations that take in lots of cash at the top and pay their low-level workers, like maintenance people, very little. But overall, we’re talking about big corporations here, many of them famous for exploiting labor.

Business taxes will account for about $664 million in the city’s 2017 budget. Let’s say that 5 percent of those companies fall into the category that would pay a surtax (and they would account for far more than 5 percent of the revenue, so let’s say 10 percent). That’s $64 million with a 50 percent surcharge, or $32 million. Funds a lot of services for poor people.

My numbers are just wild estimates, but someone ought to take a look at this; there’s real money here.

 

  • Senor_Wences

    The city actually has plenty of money and doesn’t need anymore. What they need to do is to manage their own fucking corruption and spend their budget wisely. Giving the City/County more money makes no sense when they are already a clusterfuge on fire with gasoline pouring over it.

    • curiousKulak

      Ah, Senor, Tim obviously still has ‘Santa Claus eyes’; he’s looking for more presents under that withering Christmas Tree.

      In fact, Tim’s $64m question is a good one; he’s just starry-eyed as to what we can do with it. The City already has a pension deficit approaching $500m. So its good that Tim is looking for extra revenue – its just that he’s wrong about where to spend it – its already spent – on City retirees! 10,000 homeless, 35,000 City employees – will anyone do the political calculus?

      Or maybe he’s like to cut some of Ed Lee’s 5000 additional employees!

    • Ragazzu

      Thanks for laying out all the hard statistics and sources for us, Wences!

      • Voice of Reason

        Ragazzu, this is about as well known as ‘the sun rises in the east and sets in the west’. And easier to verify. http://archives.sfweekly.com/sanfrancisco/the-worst-run-big-city-in-the-us/Content?oid=2175354 for starters. Google ‘san francisco budget per capita’ next.

        • Ragazzu

          Surely you can do better than a 7-year-old article to back up an argument. At any rate, all’s the more reason to make the superrich pay.

          And what about Wences’s contention that “The city actually has plenty of money and doesn’t need anymore.”? Why defend the outburst of an overemotional fool?

          • playland

            Here ya go, @Ragazzu:disqus , deny this:

            An April 2015 study showing that San Francisco spends $9,433 per citizen. The next closest city is New York, 8.5% lower at $8,690 (Washington DC, which is both a state and city, technically spends more per person than SF but no other American city is really close).

            https://ballotpedia.org/Analysis_of_spending_in_America%27s_largest_cities

            I know, I know, the solution is to tax the rich. That is always the answer. Simplistic, but it works. I know.

          • Ragazzu

            Don’t just tax ’em, soak ’em, especially those who offshore profits. (And they’ll remain filthy rich.)

          • curiousKulak

            Tim’s plan leaves alone all the private equity $$$, and the closely held corps. As such, its just a dog-bite in the carcass of the 0.1%.

            If DJT lived in SF, he’d STILL pay no taxes!

            Anyway, luv your sentiment; but not a real interplay between carrot and schtick.

      • Senor_Wences

        Why you are welcome. I didn’t realize this was going to be a fucking Oxford debate, dullard.

        • Ragazzu

          When did backing up one’s argument become an elitist activity?

  • Y.

    I ilke this idea. I’d like it even better if that suratx or whatever you call it is high enough to drive some of these companies out of town, lowering office rents and making the town more affordable to small businesses.

    • 4th Gen SF

      Not going to happen till the next dot flop which may never come.

  • Don Sebastopol

    What if it drives them out of town? Wouldn’t that mean less money coming in?

    • Do Something Nice

      It’s a twofer.

      • curiousKulak

        Said just like someone that lives on a monthly check.

        Ordinary people need to work.

        Not sure which is worse – the Uber-rich or the Trustifarians.

        • Do Something Nice

          I am neither.

  • 4th Gen SF

    Actually I like this idea. As far as people like Zuckerberg, can someone explain how he’s worth billions & has at least 5-10 homes in the SFBA without any compensation? I sense a shell game here, and a link or a thorough explanation would be helpful TY in advance. Zuckerberg is making billions somehow, that $1 a year is just for tax purposes I’m sure.

    • playland

      As far as people like Zuckerberg, can someone explain how he’s worth billions & has at least 5-10 homes in the SFBA without any compensation? I sense a shell game here, and a link or a thorough explanation would be helpful TY in advance.

      Relax.

      Zuckerberg started a company named “Facebook” that is currently worth $337 billion dollars on Wall Street. As founder, Zuckerberg owns 29% of that, or $98 billion.

      So if he sees a $30 million dollar home that catches his eye he just needs to sell 0.03% of the stock that he owns because he started a successful public company.

  • Voice of Reason

    This is the kind of thing that would make me leave SF, and I’ve been here 20+ years, own a house and have tons of my friends up here.

    With people like Tim you constantly worry that the golden goose might die of a thousand cuts; with this it’s pretty much Goose Guillotine. This is fine by Tim and his ilk – for now. They think it’ll bring rents down and grow their political constituency that has been eroding through increased prosperity. When the SF deficit becomes truly unmanageable, it inevitably will, those left will regret singing the Golden Goose’s swan song (sorry I couldn’t resist).

    • Y.

      If you think everything is great as it is, then there’s no reason to change anything. If you need to commute 2 hours every day into SF for a restaurant job because of this “prosperity”, or if you can’t keep a restaurant running because you can’t find employees for that reason, you might have a different perspective. SF was doing no worse and for many people much better before the tech boom.

      • Voice of Reason

        All the restaurants and the waiters are doing just fine. 7$ dollar toast and ridiculous ‘SF mandates’ are ensuring that whoever is working here is making plenty of money. And that will continue because (drum roll) – the market. People in SF want restaurants, and they will pay what it takes to have restaurants. Maybe busboys will commute two hours from Richmond, but they will do so because it is worth it. Much like I know tech workers who live in Russian Hill and commute to Sunnyvale or even San Jose – 2 hours each way sometimes. Again – because it’s worth their while.

        You are plainly wrong about how SF was doing before the tech boom. It was doing worse for many, and it was doing better for many others. Anyone who owns a piece of real estate in SF has seen their financial situation – including their retirements – substantially improved. That’s thanks to tech and Prop 13 and represents roughly 30% of the city. Anyone who works for government and lives off the gobs of money tech has brought to the city coffers is doing better financially (call that 15%). And of course the tech community (another 10%) and the many (dry cleaners, coffee shop owners, florists, etc etc) who benefit from the added prosperity. I’ve lived through two of these in 20 year, and that is just a fact.

        • Y.

          Resurants: Nope.
          http://www.eastbaytimes.com/2016/05/12/bay-area-restaurants-struggle-to-keep-workers-as-living-costs-rise/
          http://ediblesanfrancisco.ediblecommunities.com/wanted-san-francisco-cooks

          “It was doing worse for many, and it was doing better for many others”: That’s what I’m saying. It’s now worse for renters, better for long-time owners. It’s the renters I’m concerned about.

          • 4th Gen SF

            FWIW, the “good & expensive” restaurants are the ones that flout all laws. They use “interns” aka “stagiaire” which pays $0. It’s “the name”, “the prestige”, it should not even be legal but all expensive restaurants do this.

            http://www.eater.com/2015/3/16/8210363/restaurant-stage-illegal-stagiaire-kitchen-intern

          • Voice of Reason

            Restaurant employees get paid under the table. What?! Stop the presses… Seriously though, If you want people to obey the law, make the law reasonable. People want restaurants at a semi-reasonable price. You can’t run a restaurant paying line employees $15/hour and still expect patrons to tip, except for the Michelin-starred restaurants with corresponding menu prices. Until that tension is resolved, people will work around the law. Exactly the same way everyone works around immigration laws.

          • Voice of Reason

            The fact that there are 15 new great restaurants opening up in the city every three months, and the fact that Delfina and many others are booked solid completely undermines these claims. Sure some chefs will move out of town. Sure some busboys won’t think it’s worth living 4 to an apartment or to commute from Richmond. But plenty of the *obviously do* since these restaurants are opened, continue to open and are booked.

          • Y.

            Restaurants: restaurants open, and other close. The fact is that they are finding the situation getting harder. They say so, and they know what they are talking about, so I take their word for it.
            “Things change”… OK, so what are you complaining about? Tim Redmond is proposing “changes”. The Irish Catholics moved out of the Castro.If the tech companies have to move out of the Bay Area, it’s just the same, no?

  • JustJake

    “Can SF tax economic inequality?’ in a word, No. It can stomp its feet and pout… thats about it.

  • SnapsMcKenzie

    Do you ever have a solution to a societal ill that doesn’t involve expropriation from one class to benefit another?

    • Government Shrinkage

      The question is whether or not we need _additional_ expropriation. SF is already the most wasteful, highest per-capita budget city in the United States, with the slowest municipal transit system, the worse homeless problem and the worst roads. None of these statements are hyperbole. They are verifiable with a few google searches and minimal reading.

      What we should be talking about is not budget, taxes or additional monies. What we should be talking about is *how apathetic the San Francisco electorate is* that it tolerates incompetent, wasteful bureaucracies in power, and disastrous, even more incompetent socialist opposition as the only alternative.

  • Pingback: The Agenda, Inauguration Week: How and where to protest Trump - 48 hills()