A day before Uber’s expected stock market debut, Supervisor Gordon Mar announced he had the votes to place a corporate tax increase on stock-based compensation on the November ballot.
At a rally outside of City Hall Thursday, the District 4 supervisor said he had at least seven votes backing the measure on the 11-member Board of Supervisors, ending speculation on whether he could secure six needed to place the measure on the ballot.
His announcement squarely targeted Uber, which is set to make its initial public offering Friday.
“Tomorrow Uber will open for its first day of trading on the stock exchange in the largest IPO since Facebook,” Mar said. “Today we are taking action.”
Mar previously announced April 24 he would introduce the measure, which will raise the employer payroll tax on stock-based compensation from the current .38 percent to 1.5 percent, which was the rate prior to 2012. He officially introduced it for the Nov. 5 ballot on Tuesday.
Members of the board who have signed on to the measure include board president Norman Yee along with Supervisors Matt Haney, Hillary Ronen, Shamann Walton, Sandra Lee Fewer and Rafael Mandelman.
The tax would apply to any business with stock-based compensation, but would have the most impact on tech companies who go public like Uber, Mar said. Twitter, for example, enjoyed a tax break on stock-based compensation, which city officials have estimated saved the company about $40 million in the two years after it went public in 2013.
But the San Francisco Chamber of Commerce criticized Mar for characterizing the proposal as an “IPO” tax and warned of impacts to the local economy.
“This is not an IPO tax. This tax applies to all stock-based compensation – extending far beyond the tech industry,” the chamber said in a statement. “We are shocked and disappointed that this tax proposal is radically more expansive than what Supervisor Mar claimed it was for weeks, and are unsure whether members of the Board of Supervisors who are supporting this initiative truly understand how many businesses it will impact.”
Mar said that city tax policies intended to encourage the tech industry to grow, such as Twitter’s tax break, were overly generous. He argued that since The City is experiencing adverse impacts from the flourishing economy in which the tech industry has played a role, companies like Uber should pay more to offset some of the challenges like affordable housing.
Jennifer Stojkovic, a spokesperson for sf.citi, a group that represents the interests of tech companies in San Francisco, said they haven’t taken a position on the measure at this time, but noted they too would like to address the challenges facing San Francisco. The question with the tax measure, she said, is its “effectiveness” in addressing them as well as how the money is spent. “We want to dive in and look at what the spending will actually go toward,” she said.
Conversations between Mar and sf.citi are ongoing.
Asked to address concerns the tax might prompt tech companies to locate elsewhere, existing ones to leave or slow down the economy, Mar said, “We are talking about a very small tax being paid by very large wealthy corporations and it is very specific just to stock compensation. I don’t think it will have that impact.” He added, “We are now one of the centers of the tech industry and the companies want to be here.”
The board has until late July to vote to place it on the ballot. The Board of Supervisors Rules Committee will first hold a hearing on the proposal next month.
It would join another expected tax measure on the ballot, a $500 million affordable housing bond. Mar said that the housing bond amount is “not nearly enough” to address the “the scale of the affordable housing crisis.”
“So there is a need for more revenue and there is a very strong case to be made that the tech sector that’s been granted tax breaks over the past decade should now start paying their fair share to mitigate the impacts of their success on everybody else in the city,” Mar said.
It would take a two-thirds by voters to adopt the tax.
The tax is expected to raise between $100 million and $200 million annually, which would go into a “shared prosperity” fund for programs for affordable housing, low and moderate-income workers, small businesses and youth and family services. Companies must pay the tax when employees who receive stocks as part of their compensation decide to cash them in.