The Advisors' Blog

– Lynn Jokela

We’ve blogged before about legislative considerations tying corporate tax rates to pay ratios.  A recent Baker McKenzie blog says San Francisco is considering such a move.  The blog summarizes action taken earlier this summer by the San Francisco Board of Supervisors when it approved what is called the “Overpaid Executive Gross Receipts Tax” for inclusion on November ballots.

The initiative would impose a tax on companies doing business in San Francisco if their highest-paid employee makes more than 100 times the median compensation of the company’s San Francisco-based employees.  Businesses with no more than $1 million in annual gross receipts and non-profits would be exempt from the tax, but other businesses with a presence in San Francisco would potentially be subject to the tax.

As discussed in the blog, the ballot initiative is silent on how compensation will be determined, making it difficult for companies to understand the potential impact of the tax. The blog suggests the potential purpose of the tax is less about making policy and more about seeking an additional source of tax revenue.