A new economic report has intensified the debate surrounding San Francisco’s Proposition D as voters prepare to cast their ballots on June 2nd. The proposed ‘CEO tax’ seeks to increase an existing city business tax, focusing on companies with annual revenues exceeding $1 billion where executives earn at least 100 times more than the median worker.

What is Proposition D?

Proponents of Proposition D argue it would generate hundreds of millions of dollars to help mitigate potential cuts to vital city services like healthcare and food assistance. However, a recent analysis commissioned by Grow SF—a coalition opposing the measure—suggests broader economic repercussions.

Potential Economic Impacts

The study estimates that low-margin businesses, such as grocery stores and retailers, could experience profit losses of up to 25%. Furthermore, between 24% and 40% of increased business costs could be passed on to consumers, potentially raising overall consumer prices in San Francisco by 0.1% to 0.2%.

Arguments Against the Tax

Steven Bacio, policy director at Grow SF, stated, “The Prop D tax doesn’t actually tax CEOs. What it does is tax transactions, and that’s going to be passed on to consumers.” He warned that everyday San Franciscans would likely bear the brunt of rising prices for essential goods like groceries and clothing.

Historical Context and Expert Analysis

San Francisco voters previously approved a similar tax in 2020, but it was later scaled back to support economic recovery. Alan Auerbach, an economics professor at UC Berkeley, compared the tax to an increased sales tax, explaining it functions as a surcharge on the gross receipts tax.

Supporters Defend the Measure

Kristen Schumacher Nascimento, lead researcher for IFPTE Local 21, contends that the tax would generate over $300 million in revenue by targeting the city’s largest corporations. She highlighted potential federal cuts to healthcare and food assistance programs, warning of severe budget shortfalls without new revenue.

“The reason we’re facing these cuts is because huge corporations are getting tax cuts at the federal level, and in exchange, these services are getting cut locally,” she said. “While this measure won’t solve the problem entirely, it will help prevent some of the most devastating cuts to essential services.”

Broader Political Trends

The debate over Proposition D is occurring alongside a larger movement by labor groups to increase taxes on corporations and high earners. A separate statewide proposal to tax billionaires’ assets is also expected on California’s November ballot. Proposition D is anticipated to be one of the most expensive local ballot fights in 2024, with voters set to decide its fate on June 2nd.