In the shade of the US presidential elections, San Francisco residents also voted for and approved a measure for sweeping business tax changes of a Robinhood nature.
Starting in 2022, San Francisco’s Measure L, also known as the “overpaid executive tax,” will levy an extra 0.1% to 0.6% on gross receipts made in San Francisco for companies whose executive makes 100 times or more the salary of its median worker.
Voters also agreed to sweeping business tax changes that will lead to a higher tax rate for many tech companies, as well as a higher transfer tax on property sales valued between $10 million and $25 million.
California already has an 8.84% corporate tax rate, which is one of the highest in the U.S. By way of comparison, Colorado’s tax rate is 4.6% and North Carolina is at 3%. Seven states have no personal income tax at all.
New tax measures apply only to companies that earn over a million dollars in revenues.
According to the city’s officials, tech is expected to account for 17% of the tax revenues with retail and financial firms each expected to account for 23% of the revenues.
Last month, former Wells Fargo CEO Dick Kovacevich said that a California wealth tax would spur an exodus out of state.
But an exodus was already underway before the new tax was approved. The high cost of living, the pandemic and a surge in remote work have accelerated that trend in recent months and years.
For the past few years, California (with an estimated $54.3 billion budget deficit) is steadily losing companies to more business-friendly states. Just in 2018 and 2019, some 650 California-based companies moved out of state.
With no state income tax or corporate income tax, Texas is ranked number one for attracting tech companies, followed by Arizona, Tennessee, Colorado and Nevada.
Late last year, financial services firm Charles Schwab announced it was relocating the company’s headquarters from San Francisco to Texas.
Private data analytics company Palantir likewise announced it was relocating its headquarters from Silicon Valley to Colorado.
Yet, not all are moving out of Silicon Valley due to taxation. In 2018, Peter Thiel, co-founder of PayPal said he was leaving Silicon Valley and relocating to Los Angeles, ostensibly because of the liberal politics of the tech industry.
He relocated his home, personal funds, 50 personnel and Thiel Capital and his Thiel Foundation from Silicon Valley to Los Angeles.
Thiel, one of the tech industry’s rare Trump supporters, noted back in 2016 that ”Silicon Valley is a one-party state…That’s when you get in trouble politically in our society when you’re all on one side.”
However, he distanced from President Trump earlier this year due to the administration’s slow and ineffective response to the threat posed by COVID-19. But Silicon Valley isn’t luring him back, and now, with a new wealth tax in play, he might be getting company in LA.