Good afternoon sf.citi member companies,
I hope you’re doing well.
With Jen out of the office today, I’m sending you today’s Members Update. I want to provide you with a brief update on the City’s current thinking on the GRT Ballot measure and to inform you of the Board of Supervisors’ recent motion to include the “Tax on Businesses With Disproportionate Executive Pay” on the November 2020 ballot.
GRT Update
We have connected with a member of the Board of Supervisors and it’s our understanding that President Yee and Supervisors Fewer and Peskin will introduce a tax measure at the upcoming Board of Supervisors meeting on June 16 and they’re still discussing details on the measure itself. Additionally, it has been communicated to us that the Mayor will likely also introduce a competing tax measure though this hasn’t been confirmed. In terms of Prop C, it’s our understanding that there’s broad agreement at the Board and with the Mayor about the unlocking of both Big C and Baby C funding. The question remaining is how much additional revenue will be needed to address the deficit and how the City will maneuver obtaining this revenue. The Supervisor articulated that the introductions of both measures are “opening bids” to start the conversation.
Tax on Businesses With Disproportionate Executive Pay
Also currently referred to as the “Overpaid Executive Gross Receipts Tax Ordinance,” the measure was introduced by Supervisors Haney, Ronen, Walton, and Mar and intends to impose an additional gross receipts tax or an administrative office tax on businesses with a greater than 100:1 ratio of the compensation of the business’ highest-paid employee to the median compensation paid to the business’ employees based in San Francisco.
For the gross receipts tax portion of this measure, the ratio begins at a 0.1% rate if the person or combined group has an Executive Pay Ratio for that tax year of greater than 100:1, 0.2% of the taxable gross receipts for a tax year if the Executive Pay Ratio for that tax year of greater than 200:1, and builds incrementally to a maximum of 1% of the taxable gross receipts for a tax year if the Executive Pay Ratio for that tax year of greater than 1000:1.
The administrative office tax portion of this measure will be measured by the person’s total payroll expense, and the ratio begins at 0.4% of the person or combined group’s total payroll expense attributable to the City for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 100:1, 0.8% of the total payroll expense attributable to the City if the person or combined group has an Executive Pay Ratio greater than 200:1, and builds incrementally to a maximum of 4% of the total payroll expense attributable to the City if the person or combined group has an Executive Pay Ratio greater than 1000:1.
If passed, the measure will become effective on January 1, 2022. Please also note that the additional tax would be a general tax and proceeds from would be deposited in the City’s general fund to be expended for any City purposes. As such, this measure requires a 50% +1 vote in order to pass. I have attached the full legislation to this memo and also included the legislative digest which includes a table that gives you a better understanding of the proposed tax rates. Please let us know if you have any questions as we’re happy to answer them and connect with appropriate City leaders for more information.
In the meantime, we’ll provide you with a comprehensive update next Tuesday (June 16) during the full Board of Supervisors meeting and will continue to keep you updated as we hear more.
As always, please let us know if you have any questions. Thank you for your continued membership.
Zach
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