Here in San Francisco, where the rideshare giant is headquartered, the city government is marking the occasion by moving forward with a proposal to increase corporate taxes on stock-based compensation.
After rising worries that a dozen big tech IPOs in the city would worsen an already significant wealth gap and housing crisis, San Francisco Supervisor Gordon Mar first revealed his tax idea last month and said on Thursday that he has the seven needed votes in the city’s legislature to put it on the city’s November ballot, the San Francisco Examiner reported.
San Francisco, home to the world’s highest-per-capita concentration of billionaires, has been struggling with how to deal with a decade of growing wealth inequality that threatens even some six-figure-earning tech workers — nevermind the city’s residents working outside the lucrative tech industry.
This year, tech public offerings from companies like Uber, Lyft, Pinterest, and more are promising to unlock billions of dollars more for small groups of investors and executives. In response to the “IPO earthquake,” as he calls it, Mar is proposing the new tax.
Well, just hold on there for a minute. Here’s one tricky thing about this proposal that maybe shouldn’t matter much but does: Optics. This “new” tax is actually just the restoration of the tax level in 2011.
The proposal will raise the employer payroll tax on stock-based compensation to 1.5 per cent, the same as it was before the city enacted the “Twitter tax break” in an effort to attract tech business. The city succeeded in attracting the business, so now, Mar says, they have to deal with the consequences too.
“Tomorrow Uber will open for its first day of trading on the stock exchange in the largest IPO since Facebook,” Mar said in a rally outside City Hall on Thursday, the Examiner reported. “Today we are taking action.”
Uber didn’t respond to a request for comment, neither did Twitter nor any of the other San Francisco companies we reached out to.
If the proposal does end up on the November ballot, it will need two-thirds voter approval to pass. It will be a difficult road: The San Francisco Chamber of Commerce has already criticised the tax proposal as too expansive. The San Francisco Chronicle’s editorial board came out against the proposal earlier this week. And the Silicon Valley Leadership Group, which includes Apple, Facebook, and Google, opposes the proposal, the Wall Street Journal reported.
Mar estimated the tax would collect up to $286 million in the first two years that would go to affordable housing and workforce development. That number is ultimately a guess that will be subject to the winds on Wall Street.
San Francisco’s housing crisis, termed a “code red” by California Governor Gavin Newsom, impacts people across the board. Tech workers who average six-figure salaries still have trouble with median home prices of $2 million.
For the rest on the outside looking in, 90 per cent of workers in Silicon Valley have seen wages effectively fall over the last two decades, according to a recent study.
“I see this as a real warning sign,” University of California Santa Cruz Professor Chris Benner, who worked on the study with Working Partnerships USA, told Recode. “Tech has been a tremendously successful business market, but we need business leaders to ensure that our workers are benefiting from economic growth.”
The San Francisco Board of Supervisors has until July to vote on the proposal.