San Francisco’s June ballot has become a referendum on how the city taxes its largest employers, with labor unions arguing that higher taxes on corporations are needed to address a $936 million budget deficit over two years and prevent cuts to public services, and business leaders warning that increased costs could accelerate companies’ exit from the city.
Proposition C pushes back on efforts to raise a city tax tied to high executive pay, while providing more tax cuts to a wider swath of the business community.
The measure proposes an expanded exemption threshold for gross receipts taxes to companies earning up to $7.5 million in annual revenue — up from the current $5 million cap. This would allow more businesses to avoid the tax altogether. The same exemption threshold would apply to the city’s executive pay tax, which adds a surcharge to corporations whose top salaries are at least 100 times higher than the median salary of its San Francisco workforce. However, that tax would increase slightly in 2027, a year earlier than scheduled. The net loss of annual tax revenue would be $30 million to $40 million, according to the city controller.
Proposition C was introduced in reaction to the “overpaid CEO tax” backed by labor groups. Faced with a budget deficit and state and federal funding cuts, unions successfully campaigned for enough signatures to get the measure on the ballot as Proposition D. It would expand the city’s existing executive pay tax by recalculating the CEO-to-worker pay ratio using a company’s entire global workforce, and by raising the tax rate itself.
Although the measure applies to companies with more than $5 million in San Francisco revenue, 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. (Go to “San Francisco’s ‘Overpaid CEO Tax’ Heads to Voters” for a full explanation of Proposition D.)
San Francisco’s current executive pay tax framework was a political compromise among business groups, labor leaders and city officials. Voters first approved an executive pay tax in 2020 and then supported a rate reduction of about 80% under a negotiated overhaul through Proposition M two years ago.
A “yes” vote on Proposition C would broaden the tax exemption to companies earning less than $7.5 million rather than $5 million, and allow for a slight executive pay tax increase in 2027 to roughly 0.02% to 0.13% from about 0.02% to 0.12% of a company’s annual San Francisco gross receipts, depending on the magnitude of its CEO-to-worker pay gap.
A “no” vote would keep the $5 million exemption threshold and maintain the current executive pay tax structure, with the same increase scheduled for 2028.
If both propositions C and D pass, the one with more “yes” votes would generally take precedence, though such conflicts can lead to legal disputes.
Wealthy donors shape the fight
Proposition C is heavily funded by wealthy Silicon Valley donors and San Francisco-based companies, some with global workforces that could face higher taxes if employee pay comparisons are expanded beyond the city.
A campaign called Yes on C, No on D to Protect San Francisco’s Small Businesses and Economic Recovery has received $3.3 million in contributions, according to the San Francisco Ethics Commission campaign dashboard.
The smallest donation was $9,500 from AdvanceSF, a political advocacy organization that supports candidates and policies that tend to benefit business interests.
Neighbors for a Better San Francisco, another business-backed advocacy group, has spent roughly $700,000 backing Proposition C and opposing Proposition D. The group said it planned to spend $1 million to defeat the CEO tax, Politico reported. Since February 2024, Neighbors for a Better San Francisco has received just under $5 million in contributions for a variety of political campaigns.
That entity, along with GrowSF and Advance SF, is part of a network of business-aligned groups backed by wealthy donors that have played an increasingly visible role in local elections, including recalls, ballot measure campaigns and support of candidates associated with a more business-friendly agenda and increased policing.
Among them are venture capitalist and principal backer of The San Francisco Standard news outlet Michael Moritz, who donated $625,000 to promote Proposition C and defeat Proposition D, and crypto billionaire Chris Larsen with $700,000, who vowed to fight union efforts, which he called “stupid, job-killing” idea, according to Politico.
Many of the corporate donors have direct stakes in how San Francisco structures its business taxes. Among the largest are Williams-Sonoma, which has contributed $300,000, Pacific Gas & Electric with $250,000 and Kilroy Realty with $100,000. All three employ workers region- or nationwide. Under the competing labor-backed proposal, which would calculate executive pay gaps using a company’s full workforce rather than just its San Francisco employees, those broader payrolls could widen measured disparities and increase potential tax liability.
Some of the campaign’s other significant contributors have repeatedly clashed with San Francisco policies affecting their businesses. Among them, DoorDash CEO Tony Xu donated $250,000. His company has been deeply involved in high-profile policy fights in San Francisco over fees and labor classification, often combining legal action, lobbying and campaign spending.
And Uber, which has donated $100,000, has pushed back on city efforts to regulate ride-hailing, including caps on the number of vehicles allowed to operate in the city, congestion pricing proposals and data-sharing requirements, and has a long track record of lobbying and ballot campaigns around transportation and labor issues.
Not all support is from large corporate players, however.
In paid statements submitted to the elections department, small business leaders, trade groups and local entrepreneurs frame the proposal as relief for struggling employers, particularly in the wake of the COVID-19 pandemic and ongoing economic uncertainty.
Laurie Thomas, executive director of the Golden Gate Restaurant Association, framed the measure as a response to mounting financial pressure on restaurants and bars.
“For many restaurateurs, the cost of doing business in our city has reached a breaking point,” she wrote, adding that raising the exemption threshold to $7.5 million in local revenue could save small businesses thousands of dollars.
“This tax savings will allow them to hire more employees, make needed repairs, pay down debt, and provide some much needed financial relief,” Thomas wrote.
Robyn Sue Fisher, founder of Smitten Ice Cream, wrote that Proposition C would allow businesses to focus on core operations and community investment, stating that it enables them to prioritize hiring San Francisco residents and paying fair wages.
“This isn’t just about taxes — it’s about making sure storefronts don’t go dark,” Fisher wrote.
Other proponents frame the measure in terms of broader economic policy. The Bay Area Council, a regional business advocacy organization, characterizes San Francisco’s existing tax structure as overly complex and positions Proposition C as a structural reform.
“It provides much-needed predictability for our largest employers while ensuring that the city can maintain essential services,” the council wrote.
Who really benefits?
Critics contend the measure sidesteps core flaws in the tax system and risks introducing complications while reducing revenue and handing massive tax breaks to the city’s leading corporations.
In several submissions to the Department of Elections, small business owners, residents, advocates and organizations wrote that the measure was merely a “poison pill” meant to rebuff the opposing “overpaid CEO tax” ballot measure, Proposition D.
Nicholas Parker, a small business owner, argued the measure is designed to benefit large companies.
“Ask yourself: why would billion-dollar corporations spend millions on a campaign claiming to protect small businesses?” he wrote. “The only reason small businesses are mentioned in Prop C is to trick voters into approving a massive tax break for the wealthiest corporations in San Francisco.”
Jennifer Friedenbach, a housing and homelessness-relief advocate, focused on the fiscal effects of the measure, saying it would “significantly worsen the budget crisis we already face.”
The San Francisco Tenants Union said the measure would “further devastate an already catastrophic budget deficit” by worsening the city’s financial position and affecting services relied on by residents.
Larry S. Marso, an attorney and frequent ballot-measure opponent who has repeatedly challenged city tax and policy measures, writes that raising the tax exemption threshold and accelerating the executive pay tax increase could influence businesses’ hiring and growth decisions.
Companies might try to stay below the exemption threshold by holding off on expanding or adding jobs, he suggested. And because the executive pay tax is tied to the gap between top executives and lower-paid workers, firms could respond by cutting lower-wage positions, outsourcing work or shifting jobs outside San Francisco to reduce their tax burden.
No consensus at the top
The fight has split San Francisco’s political establishment.
Mayor Daniel Lurie has opposed both measures, calling them a distraction from the city’s fiscal challenges and drawing on arguments from each side to make his case.
He said neither proposal would meaningfully address the city’s immediate budget deficit and would fuel another divisive, expensive ballot fight. He added that new revenue from the competing tax increase would not arrive for years. At the same time, he echoed concerns raised by business groups that higher taxes could drive companies out of the city during a fragile economic recovery.
Some city supervisors have echoed those concerns. At a March meeting of the San Francisco Democratic County Central Committee, Supervisor Matt Dorsey warned that higher business taxes could “drive more employers out of town,” reflecting anxiety over discouraging investment or hiring.
Overall, direct support for Proposition C among elected officials has been slim, with much of the political debate instead centered on business tax increases, not reductions.
Several supervisors have emphasized the need for stable revenue, implicitly casting doubt on measures like Proposition C that would reduce the number of businesses paying taxes.
In a Mission Local survey, Supervisor Connie Chan stressed the importance of addressing inequality and ensuring large corporations “pay their fair share,” a position that contrasts with the tax reductions proposed in Proposition C.
At the March Democratic County Central Committee meeting, Supervisor Bilal Mahmood expressed doubt that higher business taxes would lead to increased prices.
The committee overwhelmingly voted to oppose Proposition C, while also narrowly voting to oppose Proposition D.
