Proposition D
Increases to Business Tax Based on Comparison of Top Executive's Pay to Employees' Pay
What is it?
Proposition D would raise rates and expand the scope of the City's Top Executive Pay Tax. According to the Controller's Office, the changes would increase annual City revenue by an estimated $250M–$300M. Despite the name, this is not a tax on executives — it's a tax on sales (technically a "gross receipts" tax). The bigger the gap between a CEO's pay and the median employee's pay, the higher the tax rate. Businesses typically pass these costs on to customers.
Beginning in 2027, the pay ratio would be calculated based on the global median compensation across all employees, not just those located in San Francisco. Since the city has not defined a method of calculation, we expect that the Dodd-Frank rules for reporting CEO pay would be used for public companies, but an honor system would have to be used for private companies. There's no enforcement mechanism beyond a tax audit to ensure that private companies report accurate pay ratios, the measure does not specify any penalties for misreporting, and there is no recommended way to calculate compensation which may allow companies to exclude certain forms of compensation (e.g. stock options, bonuses, etc.) from the calculation. These limitations are not new to this measure, but they are worth noting given the significant increase in tax rates and the corresponding increase in the incentive to underreport pay ratios.
Rates would increase across all brackets (see tables below).
The measure would also prohibit the Board of Supervisors from reducing the tax without voter approval and raise the City's state-law spending limit for four years.
Rate changes
For businesses subject to both the Top Executive Pay Tax and the Gross Receipts Tax:
| Pay Ratio | Current | Proposed | Change |
|---|---|---|---|
| 100x–200x | 0.021% | 0.183% | +771% |
| 200x–300x | 0.042% | 0.374% | +790% |
| 300x–400x | 0.062% | 0.556% | +797% |
| 400x–500x | 0.083% | 0.748% | +801% |
| 500x–600x | 0.104% | 0.930% | +794% |
| 600x+ | 0.125% | 1.121% | +797% |
For businesses that mainly manage operations from SF but earn revenue elsewhere, the tax is levied on SF payroll instead:
| Pay Ratio | Current | Proposed | Change |
|---|---|---|---|
| 100x–200x | 0.083% | 0.75% | +804% |
| 200x–300x | 0.166% | 1.49% | +798% |
| 300x–400x | 0.25% | 2.23% | +792% |
| 400x–500x | 0.333% | 2.98% | +795% |
| 500x–600x | 0.416% | 3.72% | +794% |
| 600x+ | 0.499% | 4.47% | +796% |
Existing law scheduled modest increases in 2028. Prop D would replace those with the rates above, effective 2027 onward.
Competing measure
Prop C is also on this ballot and changes the same tax code. Prop D increases rates and changes how the tax rate is calculated by looking at compensation across all employees, globally, not just those located in SF; Prop C makes smaller rate adjustments and raises the small business exemption.
If both pass, the one with more votes wins. Prop D's conflicting measures clause would void Prop C entirely if Prop D gets more votes.
Read the full annotated legal text →