“San Francisco is a metropolis of startling occasions. Completely satisfied is the person whose future it’s to assemble them up and document them in a day by day [blog]!”*
Tomorrow, voters in San Francisco will vote on a measure (“Measure L”) that might impose a further gross receipts or an administrative workplace tax on a enterprise with a better than 100 to 1 ratio of the compensation of the “highest-paid managerial worker” to the median compensation paid to the enterprise staff primarily based within the metropolis. The “In response to the Metropolis Controller:
“For companies apart from an administrative workplace, the tax charges could be a share of gross receipts attributable to the Metropolis and, relying on the manager pay ratio, would vary from 0.1% to 0.6%. For companies engaged in enterprise as an administrative workplace, the tax charges could be a share payroll expense attributable to the Metropolis and, relying on its govt pay ratio, would vary from 0.4% to 2.4%.”
This tax wouldn’t be restricted publicly traded firms that should disclose the manager pay ratio pursuant to Merchandise 402(u) of Regulation S-Okay. Neither is the ratio calculated in the identical method. Merchandise 402(u), for instance, refers back to the median of the annual whole compensation of all staff (besides the Principal Government Officer) whereas the proposed tax ordinance refers to median compensation paid to the enterprise staff primarily based in San Francisco.
The measure’s proponents argue that “[c]orporations can keep away from the tax by merely paying their executives much less or by elevating their staff’ wages.” Nevertheless, companies may may additionally keep away from the tax by transferring out of the town totally. Even these companies that select to stay within the metropolis may cut back and even eradicate the tax by terminating low-paid staff primarily based within the metropolis.
Though Measure L is aimed toward overpaid executives, it’s unclear why 100:1 is the “proper” quantity for triggering the extra tax. Some companies could have a a lot smaller govt pay ratio when calculated pursuant to Merchandise 402(u) (i.e., the ratio to all staff apart from the PEO) however exceed the San Francisco threshold as a result of they’ve a really small variety of staff primarily based in that metropolis.
* Samuel Clemens (aka Mark Twain), letter to the Territorial Enterprise (Dec. 23, 1865).
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