Editor’s Desk: Wealth Tax
New Legislation Targets CEOs in San Francisco, California
Voters in San Francisco, California, recently passed a wealth tax, or as they call it, an overpaid executive tax. Oh, you haven’t heard of it? Well, pay attention, because it might be coming to your city next. The citywide tax will mandate a levy of at least 0.1% on firms in San Francisco that pay their officers and CEOs more than 100 times the median worker salary. The idea is to raise at least $2.4 billion annually to help pay for services to the homeless. To many, this might not seem like a bad idea. The income gap in America, especially Silicon Valley, is out of control, and homelessness pervades San Francisco. Yes, that’s all true, but the City by the Bay is facing another crisis that this new tax will surely aggravate.
The ultra-wealthy, who at one time found the Bay Area to be a beacon, have in recent years been undergoing a mass exodus. There’s hardly a tech startup today that can’t trace at least part of its roots to Silicon Valley, yet now they’re packing up and getting out of Dodge. Elon Musk, CEO of Tesla and SpaceX, and Drew Houston, CEO of Dropbox, are two notable evacuees of Silicon Valley. They’ve relocated to Austin, Texas, a Western city that has undergone tremendous growth and has gotten a lot of attention from wealthy investors and up-and-coming tech companies. When companies don’t feel welcome in one city, it’s not hard to find another one with open arms. We’ve even experienced that here in my hometown of Reno, Nevada. Businesses like Tesla, Apple®, and Google® have erected factories, warehouses, customer service centers, and more here in the valley.
San Francisco’s new wealth tax isn’t a great idea, especially on the heels of the global COVID-19 pandemic. Strict lockdown mandates, which have no indication of easing up anytime soon, and a worsening economic downturn have forced not only average residents out of San Francisco, but also the celebrity-status CEOs. Plus, many companies have embraced a fully remote workforce, meaning that lots of workers don’t have to live in the expensive city if they don’t want to. When it’s time for Sacramento to impose new legislation in 2021, California’s financial challenges after its horrendous year will surely point legislators in the direction of tax hikes and new levies.
Aside from the blaringly obvious fact that San Francisco is hemorrhaging residents, let’s not overlook how this wealth tax is a slap in the face to how companies have historically been run. Executive leadership, shareholders, and a board of directors are put in place to make monetary decisions on behalf of a company. So, why is the legislature getting involved? It’s an egregious exercise of power that makes me a bit nervous. Additionally, who is to say that arbitrary third parties should in any way serve as negotiators of proper pay? It opens up Pandora’s box to let city bureaucrats and voters into the inner workings of a variety of San Francisco companies, in which the scope of power can swing wildly once these wealth tax measures are put into place. For example, 0.1% might seem doable in 2021, but what if voters decide that 2022 should come with a 5% tax levy on CEOs? When does it stop, if ever, and who essentially decides these capricious numbers?
San Francisco needs to attract CEOs, not scare them away. If it wants to continue to be the destination for technology start-ups and other businesses, it needs to loosen the reigns. Let companies run themselves, pay their CEOs too much, and bring San Francisco back to its former glory. All you other Western cities should take note, because you’ll either follow suit or gather up the runaways.
editor & publisher