San Francisco voters rejected an effort to expand the city’s “overpaid CEO tax” in the June 2 election, signaling a shift in public sentiment amid ongoing concerns about economic stability and quality of life. The union-backed Proposition D, which sought to increase levies on companies with significant executive pay disparities, failed by a margin of six points, reversing the strong support for the original tax passed in 2020.

The 2020 measure imposed a tax on firms with more than 1,000 employees, over $1 billion in revenue, and chief executive compensation exceeding 100 times the city’s median employee wage. The tax applies to gross receipts, starting at 0.1 percent and increasing with wider pay gaps, and can also include payroll-based levies. Proposition D aimed to raise those rates and broaden the wage comparison to include the average pay of all employees nationwide, rather than solely those within San Francisco. The measure was championed by local healthcare unions seeking additional funding.

Supporters argue the tax addresses income inequality and directs funds to essential public services. Critics contend it discourages entry-level hiring and penalizes companies for compensating top executives, potentially undermining corporate leadership quality. Some business leaders warned that higher executive taxes could incentivize companies to select less capable CEOs to reduce costs, ultimately harming shareholders, employees, and consumers.

The campaign against Proposition D drew financial backing from major Bay Area businesses, including Williams Sonoma, Visa, Gap, Uber, Google, and Amazon. The opposition framed the measure as a risky expansion of an already complex tax regime in a city grappling with a rising cost of living and the departure of several tech firms over recent years.

San Francisco Mayor Daniel Lurie played a key role in opposing the expansion, leveraging his 2024 electoral mandate for broad reforms aimed at improving economic conditions. The defeat of Proposition D is seen as an endorsement of Lurie’s approach and a recognition among voters that more aggressive tax policies could undermine future growth.

While the existing CEO tax remains in place, the result marks a noteworthy change in attitude within California’s most liberal urban center. It may also foreshadow the outcome of a statewide ballot measure set for November that would impose a 5 percent wealth tax on billionaires. The San Francisco vote thus serves as a bellwether for broader debates over taxation and economic policy throughout California.