San Francisco Voters to Decide Between Dueling Business Tax Measures in June Election

SAN FRANCISCO — Voters in San Francisco will decide the fate of two competing business tax measures on the June 2 ballot, Propositions C and D, setting up a high-stakes conflict over the city’s tax structure and economic future. The dueling initiatives present starkly different visions: Proposition D seeks to increase taxes on large corporations with high executive pay, while Proposition C aims to provide tax relief for small and mid-sized businesses. The outcome is complicated by a city charter rule stating that if both measures pass, the one that receives the most votes will go into effect. Proposition D, known as the “Overpaid CEO Tax,” would amend the city’s existing Top Executive Pay Tax by expanding its reach and increasing rates. It targets companies with over $1 billion in annual revenue whose highest-paid executive earns more than 100 times the company's median worker pay. Proposition C would do the opposite for smaller companies, raising the gross receipts tax exemption threshold from $5 million to $7.5 million, effectively lowering taxes for thousands of local businesses. While the headline debate centers on taxing large corporations, the uncertainty created by these competing measures presents a significant challenge for all businesses trying to plan for the future. In our experience, tax policy volatility is a major obstacle to strategic growth. Proposition C offers clear, direct relief for small and mid-sized companies, which is a welcome development. However, the potential passage of Proposition D, even though it targets billion-dollar firms, could create negative ripple effects, potentially chilling investment and impacting the supply chains and customer bases that smaller businesses rely on. Business owners should not be passive observers; they need to model the financial impact of both potential outcomes on their operations. This situation underscores the critical need for proactive tax preparation and compliance strategies that can adapt to shifting local regulations. Navigating these complexities is precisely the work we do for our clients at C&S Finance Group LLC at csfinancegroup.com. Proposition D, backed by a coalition of labor groups, aims to generate over $300 million in annual revenue for the city. Supporters argue this funding is crucial to offset potential cuts to public services, including healthcare and food assistance. The measure proposes two key changes to the existing executive pay tax, which was first approved by voters in 2020. First, it would alter the formula for calculating the median worker’s salary, comparing the top executive’s pay to the median pay of all of the company’s employees, not just those based in San Francisco. This would likely subject more companies to the tax. Second, it would add new gross receipts and administrative office taxes on businesses that fall under the executive pay tax rules. Opponents, however, warn that Proposition D could harm the city’s fragile post-pandemic economic recovery. A report commissioned by the opposition group Grow SF from the Pragmatic Policy Group argued the tax's economic consequences would not be limited to large corporations. Supervisor Matt Dorsey echoed these concerns in filings with the Department of Elections, stating that the tax increases would affect major retail and grocery businesses that residents rely on, potentially causing them to pull back or leave the city. This, he argued, would hurt small businesses, workers, and overall city revenues. Mayor Daniel Lurie has also voiced opposition, suggesting the measure could undermine economic stability. In direct competition is Proposition C, which is supported by the San Francisco Chamber of Commerce and other business groups. Its central provision is the expansion of the gross receipts tax exemption, a move designed to directly benefit small and mid-sized enterprises. By raising the qualification threshold to $7.5 million in gross receipts, the measure would exempt a larger number of businesses from the tax entirely. Proposition C also addresses the executive pay tax, but in a more moderate fashion than its rival. It proposes an increase to the tax rate for the year 2027 but would subsequently freeze the rate, preventing future increases. The clash between the two propositions has been described as one of the most expensive local ballot fights in the city's recent history, reflecting a broader power struggle over economic policy. Mayor Lurie characterized the situation as a “clear sign of a broken system” that allows powerful special interests to repeatedly reopen settled issues through costly ballot initiatives. The debate is also seen as a local front in a national political battle over corporate taxation. Some national media outlets have framed the San Francisco election as a proving ground for progressive tax policies, especially with a separate statewide proposal to tax billionaires' assets potentially heading to California's November ballot. The fate of both measures will be decided by voters on June 2. The result will not only determine the immediate tax liabilities for thousands of San Francisco businesses but will also send a strong signal about the city's economic priorities and its approach to corporate regulation in the years ahead.