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San Francisco voters approve taxes on highly paid CEOs, big businesses

latimes.com

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Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#271

Post by cactus2093 »

"The tax will levy an extra 0.1% to 0.6% on gross receipts made in San Francisco"

What counts as "made in San Francisco"? It doesn't seem like that definition would apply to online revenue for e.g. a SAAS company or social media site. It would still apply to some tech companies, those with a physical presence like Uber or AirBnb are more clear.

So is Salesforce in the clear for this tax, or perhaps they are only taxed on the revenue that comes from sales to other businesses who are themselves in SF? (And what if those businesses have multiple offices?). Seems quite complex and probably pretty easy to get out of with some accounting tricks. I guess this is a progressive SF law that really isn't targeting tech companies, for once?

On the other hand, it clearly will apply to every national chain retail store, restaurant, etc. And if so, all of their local mom-and-pop competitors will get a slight leg up from this in addition to raising the revenue from the tax. If I'm understanding this right I guess it might not be the worse idea.

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#272

Post by subsubzero »

There are multiple issues as play with plenty of guilty parties:

The city of SF: Its horribly run to put it mildly, it gets an absolute fortune from taxes and the money "disappears". See the myriad homeless everywhere, think why doesn't the city spend any money on fixing the problem? They do, they spend 300M dollars a year on the homeless [1]. Lets talk about their budget, 13.7B[2], yes that Billion for a city with 883k residents. Looking elsewhere in CA at San Diego with has 1.3M residents, it has a budget of 4.3B[3] and although there are homeless in SD its not an apocalyptic scene like SF is.

Tech Companies: Having a huge number of offices in SF with everyone making 2-4x what an average family makes in a year in the US is going to bring in some serious money. While its fine they make that much, what is not is having a extreme concentration of companies that can run their business anywhere in the US or World. With Covid we are seeing record numbers leaving the city as they are no longer shackled to the SF offices.

Residents: Alot of SF housing owners are extremely resistant to building(as more housing supply reduces their home value). There is a fierce nimby movement that would like nothing more but to halt all development in the city as it changes the 'character' of the city[4].

Strict zoning/environment laws: These laws are typically voted in by alot of residents but some have been around a long time and plague california stifling development and housing. A very long read article that goes into depth can be found here - https://techcrunch.com/2014/11/02/so-you-want-to-fix-the-hou...

Summary: Add an incompetent local govt. mix in a huge influx of wealth and a splash of laws that stifle housing development in a city bound by 3 sides by water and you get the disaster that SF is.

[1] - https://townhall.com/tipsheet/timothymeads/2019/05/18/san-fr...

[2] - https://sfmayor.org/sites/default/files/CSF_Proposed_Budget_...

[3] - https://www.sandiego.gov/sites/default/files/legacy/iba/pdf/...

[4] - https://reason.com/2018/01/05/nimbyism-in-san-francisco-reac...

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#274

Post by bluGill »

vlovich123 wrote: post #201
thorwasdfasdf wrote: post #190

Earlier quoted context omitted.

getting tech out of SF would actually do a lot of people good. I've worked at countless software companies and always wondered why the companies had to be located in the most expensive city in the US.

Isn’t it the most expensive city because of all the tech workers? Wherever you get a congregation you’ll get that effect (as Austin and Colorado are finding out), and companies generally start where workers are available (that‘a why film and entertainment industries are still largely is in LA, New York, London even if they film around the world)

Only partially. You are correct that congregation does drive up prices. However congregation drives building more housing and other things which drives prices back down. SF has done less to drive prices back down than any other city and as a result has the most expensive housing. Eventually an equilibrium is reached (in practice this is false as things are always changing, but close enough)

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#275

Post by e12e »

sokoloff wrote: post #8

> hopes the tax will drive companies to reexamine their compensation structures Outsource the lowest paid workers to a subcontractor to raise your average employee wage. I’m not sure that has a desirable effect, but it seems this law certainly financially encourages that.

> Outsource the lowest paid workers to a subcontractor

So, then the sub contractor pays the taxes and invoice you with mark-up?

Because those companies have ceos too?

I think this is rather fascinating. Assume a de-facto minimum wage of 10 dollars an hour, 2000 hours/year for 20k/year lower bound. 200 times that is 4M usd/year in compensation for a single individual. Does seem wierd to see such a big difference in campensation. If nothing else, seems to illustrate a broken labour market with horribly skewed bargaining power.

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#276

Post by kangaroozach »

singron wrote: post #141
kansface wrote: post #105

Earlier quoted context omitted.

> if SF wants to tax excessive income disparity, I say, fair enough. None of the billionaires here made that money from their salary. This will not touch them at all. > If they do leave, I don't see that as a bad thing. Chasing away jobs and the tax base will not end well. There is a decent chance SF enters a financial death spiral from its pension obligations. At the very least, massive cuts are in order. SF will no…

The text of the measure refers to "compensation", of which it gives a specific definition that includes commissions, bonuses, and equity (specifically mentioning stock options). The $1 salary CEO isn't excluded if they also have a huge equity package. Although it doesn't mention capital gains, so if the CEO owns a significant part of their company already and doesn't have an additional vesting schedule, then they cou…

Paper gains are not realized gains. So it’s all about timing. At what point in time do they check to do the math?

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#277

Post by throwaway0a5e »

umeshunni wrote: post #227
kmtrowbr wrote: post #70

Earlier quoted context omitted.

I have lived in San Francisco since 2005. Over the time I've lived here, we've had the opposite problem: lots of highly paid tech firms moving into SF. This has changed the nature of San Francisco in a way that many dislike, including me. I was initially attracted to San Francisco because, it was chill, it was beautiful, and it had a lot of eccentric, really interesting people. Many of our good friends had to leave o…

Around 2007, a gentleman named Steve Jobs invented the iPhone and unleashed another tech boom, driven primarily by the increased adoption and use of the smartphone and apps within them. The spoils from this boom primarily benefited companies and people based in and around the Bay Area. People there didn't realize that the rest of the country (and much of the developed world) were still struggling and haven't fully re…

>The increased prosperity and resulting tax base growth papered over the fundamental mismanagement and poor governance in that area

This applies to sooooo many cities. I think money beyond the level required to provide basic services just gets wasted and the citizens see nearly nothing from it. It's so common it seems like some fundamental law of the universe.

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#278

Post by rattray »

AlchemistCamp wrote: post #263
eloff wrote: post #252

Earlier quoted context omitted.

I agree companies will just suck it up and pay it if they want to be in SF. But I don't think it will disincentive new companies starting out. They have a hundred other concerns more important than how the CEO will be taxed if they one day become huge and the CEO has extremely high compensation. It won't even factor into the decision of where to locate the company. Also, you should notice most highly compensated CEOs…

The bill isn't about how CEOs will be taxed. It's about how their entire company will be taxed.

It's based on CEO pay, which doesn't apply to CEOs who are founders and get most of their "pay" in the form of appreciation of stock (rather than stock options/grants).

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#279

Post by dgoldstein0 »

qppo wrote: post #246
danans wrote: post #235

Earlier quoted context omitted.

> What this does is, it collects money from today's FAANGs while disincentivizing future startups from starting here. How many startups are there where the executives make 100x to 200x the median employee pay? That only happens via stock-based compensation at public companies. If that's the case, they're not a startup.

Is the tax assessed on options/grants even if there isn't a market to sell them?

It probably depends on how those options and grants vest. Earlier stage companies are more likely to set them up so that they vest at IPO.

Re: San Francisco voters approve taxes on highly paid CEOs, big businesses

#280

Post by [deleted] »

kinkrtyavimoodh wrote: post #188

It will work out well fiscally because giant companies will suck it up and pay, but it looks like a bad strategy from a forward-looking point of view. You want to incentivize future growth too, and you want to make sure that 20 years down the line, you have the new FAANGs of the world giving you millions in tax dollars, because history has shown that the largest of companies can eventually die out, and tech is full o…

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