As California heads toward a fight over a proposed state tax on billionaires, San Francisco has become an early battleground, with voters weighing whether to increase taxes on corporations with wide gaps between executive and worker pay.
Also known as the “Overpaid CEO Tax,” Proposition D would raise taxes on companies earning more than $5 million in annual San Francisco revenue if their top executives make at least 100 times the pay of a typical worker.
Supporters say it would in practice affect only corporations with 1,000 or more employees and at least $1 billion in annual revenue because they are most likely to meet both the scale and the extreme pay disparities needed to trigger the surcharge.
Voters first approved an executive pay tax in 2020 and then supported a rate reduction of about 80% under a negotiated overhaul in 2024. Under the current law, the tax calculates the median salary of a company’s San Francisco workforce. Proposition D would broaden that comparison to include employees across a company’s global workforce, which would likely widen the pay gap and increase the tax owed. The measure would also increase the tax rates roughly eightfold, to fall between 0.2% and 1.1% of San Francisco gross receipts, depending on the magnitude of the pay gap.
The city controller estimates Proposition D could generate $250 million to $300 million a year for the general fund, though revenues could vary with economic conditions and how companies respond.
The measure is backed by a broad coalition of unions, which have also provided the bulk of campaign funding, including Service Employees International Union locals, the San Francisco Labor Council, teachers, nurses, firefighters and other worker groups.
Supporters say the city needs additional revenue to fund public services amid budget deficits and state and federal funding cuts, and to address inequality at a moment of fiscal strain. Opponents see it as a risky reversal that could undermine economic recovery and destabilize the tax system.
San Francisco is facing a near-term structural deficit of roughly $936 million over the next two fiscal years, driven by a mix of declining revenues, rising costs and anticipated federal cuts. A major pressure point is federal policy: City officials estimate that changes to programs like Medi-Cal and food assistance could cost San Francisco more than $200 million annually by 2027-28, widening the gap between spending and revenue.
To offset the shortfall, city officials recently issued more than 120 layoff notices across departments, including jobs in public health and employee support programs, moves that union leaders criticized as disproportionately targeting frontline and support services rather than administrative costs.
At an April rally organized by the Service Employees International Union, which is leading the Proposition D campaign, Jeannette Longtin, a laid-off counselor with the Employee Assistance Program, voiced frustration shared by many in the crowd.
“The city has chosen rich people, rich corporations over employees,” Longtin said. “I am so angry.”
Maria Elena Healy, a recently laid off clinical nurse specialist at Laguna Honda Hospital, warned that eliminating clinical nursing roles at Laguna Honda was “short sighted,” and urged voters to support Proposition D to restore funding and prevent further cuts.
“Large corporations need to pay their fair share, which would support funding for essential services,” she said.
A “yes” vote on Proposition D would expand the executive pay tax by calculating the CEO-to-worker pay gap across a company’s global workforce rather than only its San Francisco employees and by increasing the tax rates to between 0.2% and 1.1% of San Francisco gross receipts, depending on the extent of the pay gap.
A “no” vote would keep the current structure, based only on San Francisco employees, and maintain the current range of 0.02% to 0.1% of a company’s San Francisco gross receipts per year, depending on the extent of the CEO-to-worker pay gap, with a slight increase scheduled for 2028.
The nation takes notice
Proposition D has drawn national attention as an early test of a broader push to tax concentrated wealth at the local level. U.S. Sen. Bernie Sanders, who recently endorsed the measure, framed it as part of a wider effort to force large corporations to “pay their fair share” amid rising inequality and federal cuts to social programs.
“Never before in American history have we seen the level of wealth and income inequality that we see today,” said Sanders, who endorsed the measure in April. “San Francisco’s Overpaid CEO Act will make these corporations pay their fair share. This tax will fund essential services like public hospitals and home care for seniors.”
Endorsers also include Rep. Nancy Pelosi, U.S. House candidate Saikat Chakrabarti, and Democratic gubernatorial candidates Tom Steyer and former Rep. Katie Porter. While some high-profile endorsers have not publicly elaborated on their support, Chakrabarti has defended the measure as a targeted surcharge on the largest corporations, arguing it would help offset federal cuts to essential services.
City leaders back tax
A majority of San Francisco supervisors has supported the labor-backed tax increase, framing it as a necessary response to looming cuts.
In comments to the San Francisco Examiner, Bilal Mahmood said Proposition D was “the only measure you will vote on this year that will provide any source of meaningful revenue” to help close the city’s budget gap.
In a questionnaire published by Mission Local, Mahmood said the tax asks “only the largest corporations to pay about a 1% gross receipts tax” while protecting small businesses.
In the questionnaire, Supervisor Danny Sauter similarly framed the tax as a way to avoid cuts to core services, while Supervisor Jackie Fielder said the measure was necessary “in a city where so much wealth is held by so few.” Connie Chan framed the proposal as an effort to address inequality: “How do we address the gap between the CEOs and the workers?” she asked, adding that large corporations should “pay their fair share.”
SF as the front line
National political media outlets have cast San Francisco as a proving ground. A report from Politico quoted Jay Cheng, the recently departed director of a deep-pocketed political advocacy group Neighbors for a Better San Francisco, describing the fight as a “front line in the billionaires’ tax fight.” A leading opponent of Proposition D, Neighbors for a Better San Francisco is backing a rival measure, Proposition C, which would preserve the reduced executive pay surcharge adopted in 2024 and expand the number of businesses exempt from the tax by raising the threshold to those earning under $7.5 million. (Go to “Proposition C Would Cut Taxes and City Revenue” for a full explanation of the measure.)
The business-backed “Yes on C, No on D” campaigners have outraised their rivals 3-to-1, thanks to six wealthy donors who gave well over $2 million of the campaign’s $3.3 million raised so far. Meanwhile, the “Yes on D” campaign has raised about $1 million, largely from labor unions and the thousands of workers whose dues support those organizations.
Opponents point to timing. Proposition D comes just two years after voters approved the tax reform negotiated by labor and business groups that reduced the executive pay surcharge by roughly 80%. Reversing that compromise so quickly, they argue, could create instability and discourage investment.
And in documents opposing the measure filed with the San Francisco Department of Elections, Supervisor Matt Dorsey wrote that Proposition D would hurt the city’s economic post-pandemic recovery.
“These increases would apply to major grocery, retail, and consumer-facing businesses that residents and workers rely on daily,” Dorsey wrote. “When major employers pull back or leave, the impacts ripple across neighborhoods, hurting small businesses, workers, and city revenues.”
Similar concerns were raised in filings by Mike Chen and Jade Tu of the San Francisco Democratic County Central Committee, tech leaders Garry Tan and Chris Larsen, sf.citi, and the San Francisco Chamber of Commerce, a leading backer of the rival measure, Proposition C.
Mayor Daniel Lurie also opposes the measure, warning it could undermine economic recovery and deepen political divisions. He has argued that neither Proposition D nor Proposition C would address the city’s immediate fiscal challenges.
Lurie also called the clashing measures “a clear sign of a broken system that rewards insiders at the expense of everyday San Franciscans,” suggesting that San Francisco’s ballot process allows powerful groups to bypass normal policymaking, force costly ballot fights, and repeatedly reopen settled issues without necessarily delivering timely or stable solutions for the city’s budget.
If both Proposition C and Proposition D pass, the one with more “yes” votes would generally take precedence, though such conflicts can lead to legal disputes.
