Rise of Machines to Spark Rise of San Francisco Taxes?

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Joyce E. Cutler

Whether San Francisco should adopt an automation tax to replace taxes lost to automated jobs is the subject of a hearing proposed by a supervisor backing CEO pay surcharges.

In practice, an automation tax could mean companies continue to pay payroll taxes on machines to fill gaps for services and education, Supervisor Jane Kim said March 14. The ongoing tax could be benchmarked against the payroll tax for the job automation supplants.

“Replacing humans with machines will generate trillions of dollars in new profits for a tiny handful of corporations driving this automation. We must start redirecting a small percentage of these new profits to retrain and then re-employ human beings that are being replaced by these machines,” Kim said during the Board of Supervisors’ meeting.

A working group will explore how to address the “automation that is coming” and is increasingly replacing jobs, contributing to the wage gap and shrinking the middle class, she said.

No date was given for when the hearing will be held.

Invoking Bill Gates

Microsoft Corp. co-founder Bill Gates earlier this year proposed taxing robots for jobs they replace, much as human salaries are taxed, Kim said.

“I think that this is an idea worth exploring,” Kim said in introducing the legislation. “We need to ensure that the massive new wealth created by automation is redirected into investing in education and training displaced workers for the jobs of the future.”

Technology and innovation are “racing ahead of our public education system,” Kim said.

San Franciscans last fall approved two tax measures to support community college—the first to increase the transfer tax for property sales exceeding $5 million to help fund free education for City College of San Francisco students and the second a parcel tax increase to benefit CCSF.

While San Francisco is considering an automation tax, the European Union in February abandoned plans for a robot tax and instead urged Parliament to devise rules addressing legal and ethical issues around robotics.

Growing Gap

A 2016 Oxford University report forecast that 47 percent of U.S. employment is at high risk of imminent automation in the next decade, Kim said.

The $15 billion robotics industry is expected to increase to $67 billion by 2025, according to Boston Consulting Group figures.

Automation is replacing accountants, lawyers and other professionals, in addition to drivers, clerks and manufacturing workers, Kim said.

Productivity gains, largely through automation, were responsible for 87.8 percent of jobs lost in 2000-10, Ball State University’s Center for Business and Economic Research reported in 2015.

Sponsor Backing CEO Taxes, Too

The tax is the latest Kim has proposed since January. The San Francisco City Attorney’s office is drafting language on legislation Supervisors Kim and Hillary Ronen requested Jan. 24 to assess publicly traded companies a surcharge to target the gap between workers’ and chief executives’ pay.

The San Francisco legislation would be similar to what Portland, Ore., adopted last year that has a 10 percent penalty for CEO pay that is 100 times the median worker’s pay. The San Francisco ratio hasn’t yet been determined.

Supervisors on March 14 unanimously approved a resolution—also by Kim—urging the San Francisco Employees’ Retirement System to define executive compensation to include all compensation, not just salary. The resolution also asks the $20.2 billion fund to develop guidelines to evaluate CEO compensation and CEO-to-worker pay ratios.

The pay resolution urges the retirement board to report to supervisors by Dec. 1 the list of companies violating the excessive pay guidelines. It returns to the full board March 21 for a final vote.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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