SAN FRANCISCO, Calif. – A new report from GrowSF, a voter education organization for San Francisco residents, warns that Proposition D could raise taxes for grocery and retail owners and ultimately burden consumers with higher prices.
Proposition D involves a tax originally passed in 2020 called the “Overpaid Executive Gross Receipts Tax.”
Originally, the tax (known as Prop. L) enacted a minimum 0.1% up to 0.6% surcharge on annual business tax payments if their top executive made more than 100 times their average worker.
In 2024, the tax was revisited (as Prop. M) and reduced the Overpaid Executive Gross Receipts Tax rate to between 0.02% and 0.129%. This proposition also reduced taxes for companies with more than $1 billion in gross receipts and raised the Overpaid Executive Tax ceiling from $2.25 million to $5 million, allowing companies to be exempt from the tax if gross receipts were below $5 million.
Today, Prop. D would raise the gross receipts-based Overpaid Executive tax rate to between 0.183% and 1.121%, an approximately 800% increase from 2024 rates. It aims to increase annual revenue for the city by $250 million to $300 million, and, if passed, would go into effect at the start of 2027.
GrowSF co-founder Steven Bacio stated, “Don’t let the name fool you, this measure doesn’t tax wealthy CEOs or corporate profits—it’s a tax that will leave consumers picking up the bill at pharmacies and grocery stores. The wealthy must pay their fair share, but this measure would fall hardest on low-income households.”
GrowSF and the San Francisco Chamber of Commerce commissioned global economic research firm Pragmatic Policy Group to analyze the effects of the Overpaid Executive Tax in San Francisco. The report found that the increase under Prop. D would negatively affect business owners’ profits, which would then increase prices for consumers and affect San Francisco as a whole.
Though all industries would be impacted, the report states that retail and grocery sectors, which typically have small 1% to 2% profit margins and price-sensitive customer demand, are likely to face the brunt of the burden of the increased tax. It estimates a profit decline of up to 25% for store owners in these sectors.
This increased pressure on profitability could result in an estimated 1,500 businesses downsizing, closing or relocating out of San Francisco. Alongside that, job opportunities are likely to slow and wage growth could be suppressed in attempts to retain profitability, with the proposition putting an estimated 10,000 jobs and $574 million in wages at risk.
This profit decline would result in a reliance on consumers to make up for the losses. The report estimates 24% to 40% of the tax burden would be passed on to consumers, and, compounded with already increasing prices due to inflation and supply costs, consumers would bear a significant portion of the burden caused by the tax.
In particular, consumers from low-income households would face a three- to four-times higher increase in costs because a larger proportion of income is spent on groceries and everyday goods. Consumers who rely on programs like SNAP are likely to struggle as well, because the program uses national inflation figures rather than local increases.
As consumers find more of their income going to basic needs, less money would flow toward other businesses, affecting the San Francisco economy as a whole. The report states that for every $1 lost in consumer spending, $2 is lost in the broader economy through knock-on effects.
“California retailers are committed to being part of San Francisco’s economic recovery, but this measure makes that nearly impossible,” said Rachel Michelin, president and CEO of the California Retailers Association. “San Francisco cannot afford this kind of self-inflicted wound. A city trying to attract businesses back cannot simultaneously pass taxes that push them out the door.”
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