The Bottom LineThe Bottom Line

Economics in Brief: San Francisco Votes To Tax CEOs and Big Businesses

Also: Four states legalize marijuana, and Californians vote to exempt gig companies from classifying drivers as employees

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San Francisco Votes To Tax CEOs and Big Businesses

Economic disparities have been exposed by the coronavirus pandemic, during which the wealthy have grown wealthier and more than 8 million Amerians have succumbed to poverty, and San Francisco voters aren’t having it. On Tuesday they voted to approve several tax measures targeting property owners and big businesses with bosses paid far higher than their average workers, AP News reports.

Under the new law, any company whose CEO earns 100 times more than their average worker will pay an extra 0.1% surcharge on its annual business tax payment. If 200 times more, the surcharge increases to 0.2%, if 300, the top executive gets a 0.3% surcharge, and so forth. On average, top U.S. executives are paid 320 times more than an average worker, according to a recent Economic Policy Institute study.

A vote was also passed to target major tech companies, raising their taxes, as well as implementing a higher transfer tax on property sales between $10 and $25 million, AP reports.

The tax looks a lot like one passed in Portland, Oregon in 2016— an idea that was considered by San Francisco leaders, but ultimately bypassed at the time.

“But now you’re seeing a big segregation between the have and have nots as executives get absurdly paid while others are struggling,” political consultant Jim Ross told AP News.

COVID-19 restrictions have emphasized that segregation, as critical elements of the city’s economy have been suffering during the pandemic, particularly due to decreased tourism and more city-dwellers working from home, reports the AP.

The new tax is estimated to generate $60 to $140 million annually, and city supervisor and author of the new tax ballot measure Mark Haney, said he wants most of it directed towards health services, according to the AP. He is not concerned about the surcharge driving companies out of the city, calling it “modest,” compared to the cost of relocating a company.

Meanwhile, Arizona approved a massive state income tax hike on high earners, while Illinois and Colorado went the other direction, the former rejecting a graduated tax amendment, and the latter voting for an income tax cut.

Voters in Four States Opt to Legalize Marijuana

The running joke that drugs won the election isn’t entirely unwarranted, as conservative and liberal parties alike voted to roll back the war on drugs. In fact, every state drug policy reform on the ballot won this year, according to Vox.

Arizona, South Dakota, New Jersey and Montana voters opted to legalize adult cannabis possession, bringing the total tally of states to legalize recreational marijuana to 15. 36 states now allow medical marijuana distribution, including this election’s addition of South Dakota and Mississippi. (Oregon further relaxed its drug laws, and became the first state to decriminalize possession of small amounts of street drugs including meth, heroin and cocaine, according to USA Today. The use of magic mushrooms for therapeutic purposes was also legalized in Oregon.)

“People are realizing it’s not just about getting high,” Avis Bulbulyan, CEO of SIVA Enterprises, a cannabis business development and solutions firm based in Glendale, California, told NBC News. “This is a tipping point for drug policy absent any federal reform.”

There will likely continue to be economic hurdles in equity for marijuana sales. Lack of access to capital and systemic racism leave entrepreneurs of color out of the game. In Chicago, a lottery system which was intended to bring equity to dispensary licensing processes ended up favoring white men, Next City previously reported. Massachusetts has faced similar disparities, where 11 out of the 309 provisional licenses have been awarded to minorities, reports GBH News.

This is due partly to the fact that prior to legalization, people of color were arrested at higher rates for possession of weed, resulting in criminal records that excluded them from starting over legally. Furthermore, big operators are prioritized because they offer more incentives to cities and towns.

“One of the things that we have definitely learned since the establishment of equity is that a license doesn’t go as far as need be,” Jacob Plowden, co-founder and deputy director of the Cannabis Cultural Association, a New York-based nonprofit that helps “marginalized and underrepresented communities” compete in the legal cannabis industry, told NBC News in February.

Californians Vote to Exempt Gig Companies From Classifying Drivers as Employees

On Tuesday, California voters approved Proposition 22, allowing major gig companies like Uber and Lyft to continue classifying their workers as “independent contractors” instead of employees, saving the companies big bucks and allowing them to withhold the benefits of being an employee, like paid leave and unemployment benefits.

“Billionaire [corporations] just hijacked the ballot measure system in CA by spending millions to mislead voters,” a coalition of gig workers opposing Prop 22 said on Twitter. “Uber, Lyft, & the other gig [companies] took a ballot measure system meant to give voice to ordinary Californians and made it benefit the richest [corporations] on the planet.”

Once the rule goes into effect in mid-December, it will require companies to pay workers an hourly wage equal to 120 percent of either the local or state minimum wage, and stipends for health insurance coverage for workers driving at least 15 hours per week. However the minimum wage protection applies to “engaged time” only, meaning drivers could legally be allowed to make as little as $5.64 per hour, according to a study by the UC Berkeley Labor Center.

“Instead of paying their drivers, gig corporations forged a deceptive $204-million campaign to change the rules for themselves and provide their workers with less than our state laws require,” Assemblywoman Lorena Gonzalez (D-San Diego), who wrote AB 5, the original state law that had required gig companies to pay benefits, and opposed Proposition 22, said in a statement obtained by Chicago Tribune.

The corporations argue that the new rule will benefit gig workers, as many had threatened to leave the state entirely if Prop 22 was not approved.

“Passage of Prop. 22 means more than a million Californians will be able to keep driving with Lyft and other rideshare and delivery platforms, and millions more will continue to have access to reliable, affordable transportation services while the nation continues to struggle with COVID-19,” Lyft spokesperson CJ Macklin said in a statement obtained by LA Times.

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter.

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Claire Marie Porter was Next City’s INN/Columbia Journalism School intern for Fall 2020. She is a Pennsylvania-based journalist who writes about health, science, and environmental justice, and her work can be found in The Washington Post, Grid Magazine, WIRED and other publications.

Tags: san franciscotaxesmarijuanagig economy

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