New report intensifies debate over San Francisco's 'CEO tax' measure

SAN FRANCISCO (KGO) -- A new economic report is escalating the fight over San Francisco's Proposition D as voters prepare to weigh in this June.

The so-called "CEO tax" would increase an existing city business tax tied to executive pay - applying to companies with at least $1 billion in revenue, and in which its executives earn at least 100 times more than the company's median worker. Supporters argue it would generate hundreds of millions of dollars to help offset looming cuts to healthcare, food assistance and other city services.

But a new analysis by the Pragmatic Policy Group argues the tax would not stay confined to large corporations. Grow SF, which opposes Proposition D, commissioned the study. PPG said its findings are based on economic research and modeling, not a prediction of a single outcome.

The study estimates the tax would disproportionally impact low-margin businesses, forecasting up to a quarter in profit losses for grocery stores and retailers. It also projects that between 24% and 40% of higher business costs could be passed on to consumers through price increases.

"The Prop D tax doesn't actually tax CEOs. What it does is tax transactions. And that's going to be passed on to consumers," said Steven Bacio, policy director at GrowSF.

Overall, consumer prices in San Francisco could rise by about 0.1% to 0.2% under the proposal, according to the report's central estimate.

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"We're going to see a rise in grocery prices, a rise in pharmacy prices, home goods prices, clothing prices, all of that is going to affect regular San Franciscans and their families," Bacio said. "We believe in a well-functioning government, and that means it needs to have a budget to operate. So we don't want to get rid of all the taxes. We support everyone paying their fair share."

San Francisco voters previously approved a similar tax in 2020, but it was later scaled back as part of a broader business tax overhaul aimed at supporting economic recovery.

Alan Auerbach, an economics professor at UC Berkeley, said voters should think of it like an increased sales tax.

"This is an surcharge on the gross receipts tax, which businesses pay in San Francisco and it applies to large companies," he said. "What is the gross receipts tax? It's basically a tax on the sales revenues that the company gets in the city."

That structure, he said, could influence how companies respond.

"It might cause them to raise the prices they charge in San Francisco," Auerbach said. "But in terms of cutting their CEO's pay or raising wages of their workers, I think that's not really very likely."

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Supporters of Proposition D argue that framing overlooks the broader fiscal picture facing San Francisco.

Kristen Schumacher Nascimento, lead researcher for IFPTE Local 21, said Proposition D targets the largest corporations in the city, estimating it would raise upward of $300 million in revenue for the city.

She points to potential federal cuts to healthcare and food assistance programs, warning the city could face major budget shortfalls without new revenue.

"The reason we're facing these cuts is because huge corporations are getting tax cuts at the federal level, and in exchange these services are getting cut locally," she said. "It isn't enough to fully solve this problem, but it's enough to at least stop some of the most devastating cuts to services that are happening with that."

The measure is also emerging as part of a larger political push by labor groups to increase taxes on corporations and high earners. A separate statewide proposal to tax on billionaires' assets is expected to land on California's November ballot.

For now, Proposition D is shaping up to be one of the most expensive local ballot fights in 2026. San Francisco voters will decide its fate on June 2.