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Crazy Taxes #187

San Francisco voters overwhelmingly a new tax such that any company whose top executive earns 100 times more than their median worker will pay an extra 0.1% surcharge on its annual business tax payment. If a CEO makes 200 times more than the median employee, the surcharge increases to 0.2%; 300 times gets a 0.3% surcharge and so on. Note that you include the workers who work one hour a week as the median is just the middle worker

I don’t know if I should laugh or cry…

First, it is expected to raise about $60 million per year, which will add lots of room for more spending to the $12 billion the city already collects.

Second, it is so hard to avoid. The San Francisco Supervisor said companies can avoid the tax by either paying their CEO less or move out of San Francisco… I wonder which a CEO would consider is better…

I had to use an example to understand this and so I went to Walmart, whose CEO last year got $22 million (Salary of $1.2 million but performance bonuses were the best ever). A google search tells me the average Walmart salary is $21,000 a year (to work out the average salary you include all part time workers so this is reasonable) so the CEO earns an crudely estimated 880 times more than the average employee, meaning their business tax rate in San Francisco will be increased by 0.6% (the highest rate under the new law)…

So instead of paying tax to San Francisco at 0.16% of gross receipts, they now need to pay 0.76% of gross receipts… and given Walmarts income is around $12 billion a year that is a massive increase.

California – what tax will they implement next…

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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