No on Proposition D
Increases to Business Tax Based on Comparison of Top Executive's Pay to Employees' Pay
What is it?
Proponents call it the "CEO tax" but, despite that name, this is not a tax on executives — it's a tax on sales (technically a "gross receipts" tax). Proposition D would raise the gross receipts tax rate by approximately 800% and put more businesses into the top tax rate by changing how the tax is calculated. Businesses typically pass these costs on to customers.
The ratio between top executive compensation and median worker compensation will determine the tax rate. The bigger the gap, the higher the tax rate. Prop D would change the comparison base from the median pay of employees located in San Francisco to the median pay of all employees globally, which will significantly lower the median compensation used for the calculation, causing the tax rate to increase dramatically.
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.
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.
According to the Controller's Office, the changes would increase annual City revenue by an estimated $250M–$300M. However, we expect this law to be challenged in court, locking up the revenue for years and creating uncertainty for businesses.
Rate changes
Here's how the rates change for businesses subject to the tax based on gross receipts in San Francisco:
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% |
Competing measure
Prop C is also on this ballot and changes the same tax code. 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 →
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Why vote No?
Prop D claims to target overpaid executives. It doesn't. It's a massive tax on grocery stores, pharmacies, and retailers that would be passed on to San Francisco consumers through higher prices.
What the analyses say
Don't take our word for it. Multiple economic analyses of Prop D agree: it won't tax CEOs, and it will damage San Francisco's economy.
SF Controller's Office of Economic Analysis · May 2026
Uses the REMI economic model to project that, averaged over the next 20 years, San Francisco will have 944 fewer jobs and $206M less GDP each year than under the baseline (a cumulative GDP hit of over $4B). Warns the tax "will encourage affected businesses to reduce their tax burden by reducing employment in the city, or by raising prices," and recommends deferring major business tax changes until SF's economy stabilizes.
SF Chronicle Editorial Board · May 15, 2026
"Overpaid CEOs won't pay a cent under S.F.'s Prop D. But you will." Even Prop D's own sponsor, Supervisor Bilal Mahmood, admitted in his Chronicle endorsement interview that the tax would hit "retail" the hardest. That means higher prices on groceries, prescriptions, and everyday goods for the San Franciscans who can least afford them.
Bay Area Council Economic Institute · May 2026
Finds SF business tax liabilities are already "far beyond other Bay Area cities" and have been "a driving force behind relocations." Prop D makes that problem worse.
Pragmatic Policy Group analysis · April 2026
The tax "doesn't actually tax CEOs." Instead, it taxes transactions. 24–40% of the cost gets passed through to consumer prices, and low-margin businesses like grocers face up to 25% profit losses.
Here's the problem: this tax is based on the ratio between a CEO's pay and their company's median employee pay. Companies with large numbers of hourly workers — cashiers, stock clerks, pharmacy techs — naturally have high pay ratios because the median employee earns $30K–$35K. Meanwhile, tech companies where the median employee earns $300K+ have low pay ratios and sail right under the 100:1 threshold.
The numbers tell the story. Under Dodd-Frank pay ratio disclosures, which we expect SF to rely on for public companies:
- Google/Alphabet: 32:1 ratio (median employee makes $331,894) — exempt
- Amazon: 43:1 ratio (source: AFL-CIO) — exempt (but see below)
- Meta/Facebook: 65:1 ratio, median employee makes ~$379K (source: Nasdaq) — exempt
- Walgreens: 410:1 ratio — 801% tax increase
- Kroger (Foods Co): 457:1 ratio, median employee makes $34,213 (source: AFL-CIO) — 801% tax increase
- Albertsons/Safeway: ~506:1 ratio, median employee makes ~$31,781 (source: Salary.com) — 794% tax increase
- Starbucks: 6,666:1 ratio, median employee makes $14,674 (source: AFL-CIO) — 797% tax increase
- Lowe's: 659:1 ratio, median employee makes $30,606 (source: AFL-CIO) — 797% tax increase
Amazon's low ratio deserves a closer look. Their CEO received no new stock grants in 2024, which artificially deflated his reported compensation. In 2021, when the CEO received stock grants, Amazon's ratio was 6,474:1. Also note that Whole Foods is folded into Amazon's numbers, so while Safeway will have to raise prices to compete, Whole Foods gets exempted. The Dodd-Frank formula is easy to game if you structure executive pay the right way.
In other words, a tax marketed as going after overpaid tech executives would actually exempt tech companies and hit grocery stores, coffee shops, pharmacies, and retailers with an ~800% tax increase. Companies get a lower tax bill for paying their median employee $332K than for paying them $31K.
Consider what this means in practice. Grocery stores operate on net profit margins of 1–3% — in 2023, the industry average was just 1.6%. An ~800% tax increase doesn't leave room for absorbing the cost, instead companies have exactly two options: raise prices or leave the market. So what do you think Safeway does? Raise prices and lose all their customers to Whole Foods, or leave the market entirely? We think there will be a lot more empty storefronts in San Francisco if this passes.
We understand the need for revenue. Federal Medicaid cuts from H.R. 1 are real and will cost San Francisco over $300M per year. But a poorly designed tax is worse than no tax at all. An ~800% rate increase across all brackets is extreme.
The Controller's Office warns that actual revenue could vary significantly because the tax applies to a narrow base of payers and businesses may relocate out of San Francisco. When the city's existing business tax structure was just reformed in 2024 with Proposition M, piling on an 800% rate hike to one component sends exactly the wrong message to businesses considering whether to stay.
Prop C is also on this ballot and addresses the same tax with more modest rate adjustments and a higher small business exemption. If you want to strengthen the overpaid executive tax without driving grocers and pharmacies out of the city, Prop C is the better option.
Vote No on Prop D.