
San Francisco will put ‘CEO tax’ on the ballot this November - Apocryphon
https://www.mercurynews.com/2020/07/29/san-francisco-will-put-ceo-tax-on-the-ballot-this-november
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maxk42
The total number of CEOs this is likely to affect is zero.

> According to reports, Wells Fargo, the bank headquartered in San Francisco,
> increased its CEO’s salary to $23 million in 2019. It would have to pay its
> median worker in the city at least $38,000 to avoid the highest tax rate and
> $230,000 to avoid the lowest tax rate.

Well the minimum wage in San Francisco is $33,425.60 annually, so the median
wage is almost certain to be above that since I doubt more than half their
employees are entry-level bank tellers making minimum wage.

Additionally since Wells Fargo is headquartered in San Francisco, I'm sure the
number of highly-compensated key employees present locally is even higher.

> additional tax would only apply to companies with gross annual revenues of
> at least $1.7 million and executives who make at least $2.7 million annually

Again, minimum wage for a full-time employee is $33,425.60 annually, so this
really could only apply to executives making more than $3,342,560 unless we're
talking about part-time jobs. The net effect of this is going to be nil all
but the largest corporations that have a large minimum-wage workforce based in
the city and perhaps a handful of small corporations that employ a large
number of part-time employees. So whereas I'm sure they passed this intending
to make it sound like they're sticking-up for the little guy, the net effect
is going to be the loss of a number of minimum-wage jobs. A couple big-box
stores might either pay-up or move outside the city limits. And a lucky
handful of employees might receive a modest raise. But probably not, since any
small corporation could just as easily compensate their executives via
dividends which are not covered by this legislation.

In short: This is the legislative equivalent of a puff piece. Designed to
sound good on paper without actually effecting any meaningful change.

~~~
jbob2000
While it seems ineffective now, the legislation installs the knobs and levers
which can later be turned or pulled to achieve effectiveness.

~~~
bleah1000
It's likely if this passes, we'll see companies use the pandemic as a reason
to move out of SF. If these companies see that the city is becoming
increasingly hostile to them, why would they stay? This is also the perfect
time since it's likely that you can get real estate for much cheaper in other
parts of the state or even in a different state.

In the end, I wouldn't be surprised if just putting this on the ballot caused
a few companies to decide to move away, which results in less tax revenue for
the city. This whole thing seems short sighted, and unlikely to do anything
but hurt the people of SF.

~~~
Apocryphon
Stripe moved its headquarters to South SF, which is a useful tax dodge but SF
workers are probably not too adversely affected. Others might do the same, or
move to other neighboring cities such as Oakland. Of course, it's unknown how
the pandemic will change logistics next year.

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tootahe45
Haven't done any calculations, but this sounds like one of those taxes which
earns very little revenue, and can easily be bypassed? Essentially it exists
just to stroke a politician's ego and gain support from those with tall-poppy
syndrome.

~~~
Erlich_Bachman
Until they increase the percentages a couple of years down the line, when they
already have the foot in the door (when the law itself is already
established). Just like they did with VAT in many countries.

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user5994461
Low pay employees are hired through contracting agencies, they're not on the
books of the mother company and have none of the benefits.

The tax seems to ignore that entirely, contractors don't factor in the median
pay of the company at all. If it weren't bad enough, the tax will only
encourage executives to push even more employees to contracting.

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EdwinLarkin
Can we just please stop duct taping the broken system?

We need fair taxes.Not high, not low. We need to hit the sweet spot between
"it does not pay off finding the loophole and transfer all the money
elsewhere" and "not paying anything to the system".

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pmlnr
The fact that there are ceos who get paid 200x more, than an employee, is
already outrageous.

~~~
tluyben2
Well some CEO's maybe should; I don't know how it is to run companies with
50000+ employees; as a long term CTO myself, I look to work with CEO's who are
not greedy and spread the wealth with the employees and who are not just out
there to buy jets and ferrari's. (Actually, I have a natural aversion to
people who buy sportscars with their wealth as I find it rancid and decadent
in this day-and-age, but that's another story. Also probably because I'm Dutch
and know many very rich people over there who drive shit cars, live in small
houses and go by car and caravan to France on vacation.)

I do see why CEO's (and all c-level if they are founders, have board seats,
are early investors, have a high amount of %) should be compensated well over
employees; they take the risks. Or rather; they should take the risks. If
times are bad, I am looking to work with people who cut their own salary or
reinvest to keep the employees and not just throw everyone out and take the
bonus and then close up shop (which seems to happen a lot with startups right
now).

200x is over the top I guess; I cannot see how you bring _that_ much more
value than your employees. Like said; no idea how it works at real
enterprises, but in companies I see with few 100 to few 1000 people; I can
walk around and remove a few dozen people (employees) and the entire company
will grind to a halt. There are always vital things that are governed by a few
(early?) employees which, if removed, are extremely hard to replace. This
means that at least those employees cannot earn 200x less than the CEO, not
100x less either.

I saw a post on Twitter a few days ago about those kind of employees of these
kind of companies starting a company together, resigning and then having the
new company acqui-hired by the old company for many millions. That's how you
should handle that situation if you have a CEO that is that greedy indeed.

~~~
WalterBright
> 200x is over the top I guess; I cannot see how you bring that much more
> value than your employees.

Steve Jobs took over Apple when it was 90 days from bankruptcy and turned it
into the most valuable company in the world. Apple had a series of CEOs before
Jobs that didn't.

Essentially, the CEO decides which hill to climb. The right hill, the company
makes $$$. The wrong hill, the company languishes. That's worth a heckuva lot
of money. Nobody else in the company has that kind of influence over its
fortunes.

~~~
fsh
That's just cherry-picking one particular case with a positive outcome. The
last few Boeing CEOs were also paid tens of millions per year and ended up
running the company (and two planes) into the ground.

~~~
fastball
Yes, but this is in response to "nobody should make 200x their employees".

But it's really not that simple. Some CEOs _are_ that valuable. Some are not.
You need to figure out if they're a Boeing CEO or a Steve Jobs and compensate
them accordingly.

~~~
roenxi
> Some CEOs are that valuable.

The question isn't "are they valuable" though. The question was "how much
should they be paid". There are people in labs, technical committees and
various other key institiutions who create untold billions of dollars in value
far in excess of what Jobs did. I doubt Alexander Fleming made money in
proportion to the value of his contribution.

I don't necessarily disagree with how CEOs are paid. But I do disagree with
the idea that value factors into the conversation somehow. Nobody is paid
based on their value except by accident.

~~~
WalterBright
People in the free market are paid based on the value they are expected to
contribute.

The reason is pretty simple - supply & demand.

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LockAndLol
0.1-0.6%? That's laughable.

I don't know if income tax is federal or a state issue, but if they simple
increased it in the higher income bracket they would surely get more in their
state coffers. (Yes, I know SF is a city).

SF could also add a tax for people with uninhabited homes in the city. If you
don't live in it, you pay the amount of money the city would've made had
somebody been living in it.

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Hydraulix989
The only effect this will have is making SF even more of a hostile place for
doing business during a mass exodus of people already leaving. There's other
ways of controlling outrageous CEO pay than raising taxes.

~~~
consp
I'm going to be a bit skeptical as most free reign in this respect in the past
30 years has created this situation and ask: What do you propose that would
actually work?

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birdyrooster
When cities raise taxes they add value as opposed to accepting the status quo
or racing to the bottom in a price war. Similar to business, attracting
businesses as a city by competing on price is detrimental to the other aspects
of city that could provide a unique value.

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briandear
So if a company pays its CEO less, will they get a tax credit? Unlikely. With
coronavirus, why does a company need to have a San Francisco HQ? Simply move
the headquarters to Las Vegas, Reno, or Texas, and hire remote.

To my knowledge, there aren’t too many hardware companies in San Francisco;
they are mostly companies they have employees that sit at computers typing
stuff or calling people. Other than cachet, why would a company choose to
locate in the city limits? The tax is admittedly rather small, but being in
San Francisco is a death of a thousand cuts.

~~~
nikanj
The location of the HQ on paper has nothing to do with where the office
actually is, anyway. So many large corporations are registered in Delaware, or
in a tax haven.

