Increases the tax rates for large businesses based on the pay ratio between top executives and average employees.
The proposed measure would increase the rates for the Top Executive Pay Tax (one of the city’s existing business taxes, also known as the CEO Tax) by 800% to 900% starting in 2027.
Additionally, the measure would redefine the executive pay ratio as the difference between the salary of a company’s highest-paid manager and the median salary of all the company’s employees worldwide, rather than the median salary of the company’s San Francisco workers. The median salary for San Francisco workers is significantly higher than the global median. With this change, new companies would be subject to the Top Executive Pay Tax, and many would be recategorized into higher tax tiers. The new tax rate would apply to nearly any large company with at least $1 billion in San Francisco sales and more than 1,000 employees globally. It would therefore apply to a wide range of companies, including not only large technology and financial services firms but also retailers, including pharmacies and grocery stores.
The controller estimates that the measure would generate $250 million to $300 million a year for San Francisco’s General Fund.
Both Prop. C and Prop. D propose changes to San Francisco’s current business tax structure.
Bringing in about $1.3 billion annually, business taxes are San Francisco’s second-highest revenue source, exceeded only by property taxes. The Gross Receipts Tax, which accounts for 88% of business tax revenues, applies to businesses with more than $5 million in revenue. The Top Executive Pay Tax is an additional gross receipts tax applicable to businesses with at least 1,000 employees or $1 billion in sales that pay their highest-paid manager more than 100 times the median pay of their San Francisco employees. The tax rate is tiered according to the ratio of the salary for a company’s highest-paid manager to the median San Francisco worker’s salary. The city collected approximately $130 million in revenues from this tax in fiscal year 2023–24, according to the controller.
In 2012, San Francisco voters approved the city’s transition from the payroll tax to a gross receipts tax. Like an income tax rate, the gross receipts tax rate increases with gross revenue, making it more beneficial for small businesses than the previous flat payroll tax.
From 2018 to 2020, voters passed additional ballot measures to increase gross receipts taxes, including a homelessness gross receipts tax on large companies and a commercial rents gross receipts tax. In 2020, voters approved the Top Executive Pay Tax, which imposed an additional gross receipts tax on companies with a high compensation ratio between top executives and the company’s median San Francisco worker.
The rise of remote work after 2020 exposed the vulnerabilities of the city’s business tax structure. First, the city was overly reliant on a small number of companies for its tax base. In 2024, the top 10 taxpayers paid 28% of total business taxes. The Top Executive Pay Tax was even more concentrated, with the top 10 companies accounting for 61% of revenue. Second, the city’s “payroll apportionment factor” reduced business taxes for companies with remote workers, disincentivizing local job growth. Third, the city’s tax code had become convoluted, with 14 categories of business taxes.
To address these weaknesses, the city reformed its tax structure again in 2024. In an effort led by the Office of the Controller and the Office of the Treasurer and Tax Collector, the city conducted analysis, engaged with employers and stakeholders, and finalized its proposed reforms in May 2024. Business groups, nonprofits, and labor organizations collected signatures for a November 2024 ballot measure to implement those reforms. The resulting Prop. M
The new tax structure became effective in January 2025, and companies are just beginning to file under it. Therefore, the impacts of the new structure remain unknown.
The One Big Beautiful Bill Act (H.R. 1), enacted in July 2025, will impose significant cuts to critical social safety-net programs nationwide. The controller has estimated $200 million in lost revenue annually due to these cuts, which will exacerbate the city’s fiscal deficit, estimated at nearly $169 million for FY 2026–27.
To fill that deficit, Supervisor Chan proposed raising the Top Executive Pay Tax and imposing new fees on ride-hailing companies. Chan’s measure, co-signed by supervisors Chen, Fielder, and Walton, was withdrawn when labor unions filed this voter initiative.
Prop. D was placed on the ballot through a signature-gathering campaign led by Service Employees International Union 2015, SEIU 1021, and the International Federation of Professional and Technical Engineers Local 21. It requires a simple majority (50% plus one vote) to pass. A competing measure, Prop. C, was placed on the ballot in response to Prop. D. If Prop. C receives more votes, it would nullify Prop. D.
The federal H.R. 1 funding cuts will be devastating to low-income residents, immigrants, and people with disabilities, restricting their access to food, health care, and social services. The San Francisco Department of Public Health and Human Services Agency estimates that as many as 50,000 San Franciscans may lose health care coverage. The proposed measure would help offset those impacts. The departments/agencies that receive the largest discretionary General Fund expenditures are Public Health, Police, Human Services, Fire, Homelessness and Supportive Housing, and the Sheriff. If the measure helps the city close its structural budget deficit, resources for vulnerable populations would be protected.
Gross receipts taxes are more progressive than other types of business taxes because the rates increase with revenues, much like an income tax. The measure would preserve the exemption for small businesses with gross receipts of less than $5 million.
Federal budget cuts could impact as many as 50,000 San Franciscans who rely on Medi-Cal and CalFresh to access health care and food. Developing sound fiscal strategies to mitigate those budget cuts is critical. However, Prop. D could undermine San Francisco’s ability to attract private investment at a time when the city’s economy is vulnerable. Some retailers, including grocery stores and pharmacies, have plans to close their San Francisco locations if the measure passes. Furthermore, Prop. D would increase risk to the city’s revenues by relying on a small number of companies for business tax revenues.
The comprehensive reform under 2024’s Prop. M maintained a progressive tax policy that reduced the tax burden on small businesses while protecting the city and taxpayers from volatility and unpredictability. It was developed with rigorous policy analysis and won strong support from a broad coalition. Because the new tax structure only became effective in January 2025, it’s too soon to know what its impacts will be. SPUR believes that the efficacy of the newly adopted tax structure should be thoroughly evaluated, and further analysis should be conducted in partnership with business and labor before returning to the voters with a new revenue proposal.