Uber Faces Proposed ‘IPO Tax’ in a San Francisco Divided by Inequity
(Bloomberg) -- Uber Technologies Inc.’s initial public offering, expected next month, will mean a massive payoff for many employees. In the company’s hometown of San Francisco, it will also deepen fears that a wave of technology IPOs threatens to displace other residents who are being left behind. One city lawmaker plans to propose that tech companies share the wealth.
San Francisco Supervisor Gordon Mar is circulating a motion that, if approved by a majority of the county board, would place a payroll tax covering stock-based compensation on the November ballot. The proposal, a draft of which was obtained by Bloomberg, would impose a new cost, “for the privilege of engaging in business in the city,” on companies that dole out equity to employees.
Mar told local labor and community activists at a meeting Monday night that he plans to announce the proposal on Wednesday during a subcommittee hearing and to introduce it in the next couple weeks, said Kung Feng, executive director of Jobs With Justice San Francisco, a coalition of labor and community groups that’s among the organizations advocating for the tax. Uber declined to comment because it hasn’t seen the legislation.
Tech IPOs this year could mint thousands of new millionaires. Two San Francisco companies, Lyft Inc. and Pinterest Inc., went public in the last month, achieving a combined market value of $31 billion. Redfin, the real estate brokerage, found the wealth created from Lyft’s offering alone would be more than enough for current and former employees to buy every home listed on the market in San Francisco, in cash. When Uber goes public next month, it’s expected to nab a market value of as much as $100 billion.
“We know corporate IPOs alone did not cause income inequality and our social crises,” Mar plans to say at the Wednesday meeting, according to prepared remarks shared by his office. “But they have, and will, exacerbate it. So today I’m announcing a proposal to tax the wealth generated by IPOs to fund programs to address income inequality.”
The potential law, which some are calling an “IPO tax,” reflects uneasiness in a city with constant reminders of the income gap, from Google buses to Uber drivers sleeping in their cars. A new analysis from San Francisco’s budget office indicates that IPO riches under the current tax system will provide little benefit to the city while driving up housing prices. But there’s a long road to making a new law. For it to take effect, the motion would need to secure majority support from the board of supervisors, win approval from voters in November and survive any potential legal challenges from affected companies.
Big tech companies “should be able to help with housing for people who are born and raised here that they are pushing out,” John Harris, an employee of the San Francisco Human Services Agency who’s been living in a truck, said in an interview before testifying at the hearing. “Not just run everybody out of here.”
The money from the tax would support affordable housing, lower-income workers, education and other benefits, according to Feng, one of several people briefed on the plans who spoke to Bloomberg. This year’s IPOs are “going to create vast inequality and displacement, and we as a city need corporations to pay their fair share and be good neighbors,” said Feng. “The IPO tax is one step toward that.”
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