Dive Brief:

• Three groups are fighting San Francisco's Proposition C, a November 2018 ballot measure to tax the city's largest companies and put the money toward homelessness mitigation programs.
• Two business groups — the California Business Roundtable and the California Business Properties Association — along with one anti-tax group — the Howard Jarvis Taxpayers Association — released a statement regarding their legal documents filing, asking courts to invalidate Prop C. They say the measure is a "special tax" and should have required a two-thirds majority vote for approval, yet it instead passed with a simple majority.
• The city contends that tax measures initiated by citizen petition instead of by the city only need majority approval. The ballot measure passed in November with 61% of the vote, just shy of the 66% that would constitute a two-thirds vote.

Dive Insight:

Proposition C allows an average half-percent tax increase on all businesses that exceed $50 million in revenue annually. It is expected to raise $300 million annually to support homeless services.

Proposition C passed with nearly two-thirds of the vote, but it was not without opposition. Even Mayor London Breed, who has made housing and homelessness mitigation one of her administration's main objectives since taking office last year, did not support the measure. She said she agreed with the idea of helping the homeless but thought Prop C had flaws as it was proposed.

Prop C's full implementation has been held up since its passage because of concerns that any additional taxes collected under it might have to be returned to businesses if the measure is overturned in its ongoing legal battle. Last week, San Francisco's Board of Supervisors approved Breed's legislation allowing companies that would be more heavily taxed under Prop C to waive their right to a refund if the measure is overturned, in exchange for a 10% deduction on tax liability. The money collected from these companies would be immediately available for the city to use on homelessness programs instead of waiting to learn the result of legal holdups.

San Francisco's situation with Prop C further fuels the debate about whether large companies should be obliged to contribute more to help the affordable housing and homelessness crises. Some say they should because the companies bring an influx of highly paid employees to an area, which causes housing price and cost-of-living spikes. But others say these companies and their employees are merely reaping the rewards of hard work and innovation and they should not be treated differently than any other business.

Last year Seattle passed a "head tax" similar to San Francisco's Prop C but quickly overturned it following pushback from the business community. In addition to San Francisco, numerous other Bay Area cities have considered a head tax. But leaders have been slow to move forward with these ideas after seeing the failures and legal wrangling in other places.

Generally speaking, opponents agree with the concept of helping the homeless, but they do not believe large businesses should be forced into further action. They would rather see continued voluntary donations to housing and homelessness programs such as those put forth recently by NetApp and Okta.

The three groups that took legal action against San Francisco for Prop C employed an interesting tactic in that they are not focusing on whether or not big businesses should contribute more heavily than small ones. Rather, they're keeping the focus on the legality of the proposition.