"It's a racket and is one of the reasons Twitter and Zynga are threatening to leave SF if the city doesn't give them a break on the tax."
Lots of cities have payroll taxes, and they're not a "racket" -- it's the cost of doing business in a city. What's unusual about SF is that it has a law that considers gains on employee stock options as taxable pay, not that it has a payroll tax.