“Overpaid Executive Tax” in SF hits firms that pay CEOs 100X more than workers
arstechnica.com
arstechnica.com
Other fields do this regularly - hospitals often organize their physicians into a distinct staffing org, for instance. It’s entirely legal. So is this anything other than a feel good law that will push some minor corporate restructuring?
FYI, this is already a common practice.
Yes.
> Do you really need a 10 page long comma separated list of every possible situation?
Yes.
> Yes.
That's not correct, although it doesn't seem like it to everyone because there is so much abuse. Intent matters. Lots of cases have been brought against abuses to circumvent existing laws, which have been successfully litigated.
Clearly, accountants and lawyers can engage in fuckery as they did at Enron. But the law is fully capable of calling out a sham, even it it has recently become reluctant to do so.
[1] https://www.pwc.com/us/en/cfodirect/publications/accounting-...
Hospitals do this in the opposite direction. If you're in the suburbs a metro area (where cost indexes are higher, so Medicare reimburses at a higher rate), you try to make your own expenses look higher to convince CMS to include your hospital into the same cost index as the metro area itself. One tool to do this is to separate out unskilled workers (housekeeping and the like) into a separate corporation, thus moving the average pay rate higher.
Source: wife managed Medicare and Budget at a large hospital just outside of the NYC area, and did exactly this.
It's funny how San Francisco often seems to be both the home of the US tech industry, and the home of opposition to the US tech industry.
This pairs hilariously with Prop 22 making all Uber's low wage employees non-employees.
"Virtue signaling" is a phrase with no good connotation to corrode, and one I'd prefer for the critiwue I believe you are trying to make.
I'm slightly concerned that you are going to see them just shift jobs out of SF... isn't that logical? May be harder for some businesses, but they will all do a cost-benefit analysis of raising median wages in SF, paying the tax or moving the SF jobs somewhere else?
I think you can't pay the executive less... the executives that land in this level of pay are paid based on what they could get at another company (that is not based in SF... there are not really cost-of-living adjustments at this level...), speaking generally and in broad strokes. So you shouldn't see any changes to the top end of the equation (which isn't want they are going for... they are going for raising the less paid workers' wages, so they did that right.)
The CEOs that don't move out of SF will just reallocate some employee promo budget to executive comp budget to make up the difference. It's a populist measure that at best will do nothing, and at worst will reduce the SF tax base.
I suspect that taxes work less well when the whole point is to lower people's utility. "Lower your utility or we'll do it for you!"
It's downright impressive to me that one of (if not the most) educated cities in the nation is ignorant of the fact this will likely do much more harm than good in the long run.
> San Francisco is one of the most desirable cities in the United States for companies to be located.
You're only the prettiest girl at the party until you're not anymore.
Never underestimate the ability of emotional responses to trump rationality across all demographic groups.
What the law should promote is upward pressure on the lowest earners' compensation rather than downward pressure on the top earners' compensation. Minimum wage hike, for example. Much greater potential to improve the lives of the lowest-paid workers; businesses often threaten to compensate via layoffs but usually don't follow through, at least not enough to completely offset the change.
The effects come in through other means besides layoffs. The businesses still have to make up those expenses somehow, and non-monetary compensation is a primary target. If the government is telling businesses that it must provide greater monetary compensation, then they'll compensate by offering less non-monetary. This will happen through measures like eliminating training programs that could help employees get off that bottom rung; or eliminating flexible scheduling that, say, a single mom might need to attend to her kid's needs. Essentially, there are many form.
Long term, there are more negative consequences to minimum wage than you can count through just disemployment effects, which are already keeping the very lowest rung of people unemployed.
Assuming everyone is paying the gross receipts tax, however, the 0.1% more on gross receipts (0.2% if CEO is paid 200x the median, 0.3% if 300x etc up to 0.6%) can add up quick over a few years.
Visa isn't HQ'd in SF (so they would be paying the Gross Receipts Tax?), but their revenue was 23 billion last year. 0.1% of that is $23 million. If that is true, do they just shutter the SF offices? Can they still do business in SF?
Wells Fargo has $85 billion of revenue last year, so 0.1% would be $85 million. They are HQ'd in SF, so they would be paying the payroll part. I don't have the numbers handy there but I bet it's not cheap either.
Since this applies to public and private companies alike, it seems like a no-brainer that more companies will follow in Stripe's footsteps and move their headquarters to other places in the Bay Area (or Colorado like Palantir lol, though they were never in SF).
1: https://ballotpedia.org/San_Francisco,_California,_Propositi...
2: https://calmatters.org/california-divide/2020/10/san-francis...
Whereas on the other end its kinda a no-brainer that the McDonalds CEO is paid significantly more than the average fry cook... like come-on. Again a reason I am never going back. This city is a piece of shit. Good luck with the exodus.
If he produces more than 100x the value that others produce, it's perfectly ok.
Nadella and Steve Jobs are obvious examples of the tremendous value a CEO can bring.
Why not?
in the usual economic sense, you keep paying until it hits the exact costs, you don't pay too much and you don't pay too little.
Now lets think of a two kind of counter factual worlds and think of which is worse for the firm.
1. CEO disappears from the company, that marginal benefit is lost and the costs disappear.
2. Where a "Low Level" employee disappears.
I don't know the answer for which one is worse for the firm, but World 2 sort of actually happened when Corona started. "low level" employees with very little costs started to disappear and it turns out the value of these employees was much more than their costs - as shown by how badly the economy tanked from these people not being able to work. That is, it seems the value these employees bring is quite high compared to their costs... yet for some reason they are paid much less. And from just a general economic sense, that seems not okay to pay too little.
Most of the arguments against high CEO wages seem to completely forget about the capitalism we live in. I do not think the current system is the perfect, but for better or worse, the rules are relatively simple. To say that CEOs earn too much is a sign of double standards.
CEOs are chosen by private companies using their hard earned money from a market of CEOs governed by supply and demand. Companies are always out to cut costs, and that applies to CEOs.
You may not find it morally sound, but to blankly say "CEOs have to earn X amount" is really hypocritical.
FIW, Quite a few economists have looked into this, and there is at best no, and at worst an inverse, correlation between value creation and CEO pay. Some of the highest-paid CEOs in America head slow-growth or even unprofitable companies.
On on hand, using median salary rather than an absolute amount seems fair, but in practice, this will most likely result in firms creating subsidiaries to employ their lowest-paid employees rather than raising their pay.
Small nit, but the law evokes measuring against the median wage not the average.
Besides that, from the wording of the article it seems like they have a different goal than your argument. Your post reads as if they should be optimizing for the number of employees rather than more pay equity.
Edited: grammar