Last year, in the same election that swept into office a new mayor promising to bring business back to San Francisco, voters overwhelmingly approved a grand compromise between organized labor and the business community over the issue of taxes. It was called Prop M, and it was a victory for common sense in a city known for its slow-growth, obstructionist policies and back-biting politics.
Now, before the proverbial ink on that deal has dried, unions, aided by an ambitious politician who marches in lockstep with them, have reneged on the agreement. The breakdown creates a perilous moment for Mayor Daniel Lurie, cheerleader-in-chief for a San Francisco that is becoming, as he has repeatedly promised, “open for business.” It also signals a rejuvenation of the progressive-versus-moderate battles that dominated political discourse for so long and that Lurie has been diligently working to quell.
Connie Chan, the District 11 supervisor and newly minted aspirant to succeed Nancy Pelosi in Congress, and a coalition of labor groups each have put forward measures for next year’s ballots that would undo the 2024 compromise. If enacted, either measure would dramatically raise a tax on companies that pay their CEOs many times what their average workers earn, the so-called “Overpaid Executive Tax.” The labor-business detente in 2024 that became Prop M reduced that punitive levy by 80% while raising business taxes across the board in future years.
Chan and big labor’s tax measures are wrong for so many reasons, not least of which because they encourage companies to avoid doing business in San Francisco. They’re also a smack in the face to Lurie, who has spent his first year in office attempting to build bridges to labor and its progressive allies in the name of political comity and economic rejuvenation.
“It reinforces a message that San Francisco is still not a place where companies and investors can expect long-term predictability,” said David Harrison, director of public policy for the San Francisco Chamber of Commerce, which represents a broad swath of companies. “There was a good-faith agreement,” Harrison added, referring to the deal brokered by the administration of then-Mayor London Breed and agreed to by Aaron Peskin, then president of the Board of Supervisors; top public-sector union officials; and lobbyists for businesses. “We’re playing with fire here.”
The biggest burning issue at play is an effort by Lurie to shore up the shaky finances of the San Francisco Municipal Transportation Agency. Both measures would raise taxes on companies with highly compensated CEOs. But Chan’s, which also slaps new taxes on non-taxi, ride-hailing companies like Uber, Lyft, and Waymo, is set to be on the same November ballot as a new, local property tax to bail out Muni that Lurie is championing. His thinking is that transit is key to downtown revitalization. Not for nothing, unions that represent Muni’s workers stand to benefit from the new tax. Transit advocates—otherwise delighted to zap the ride-hailers as part of their undying war on cars — fear that a competing tax increase would sour voters on saving Muni.
This being San Francisco, there are multiple unspoken issues at play, some obvious and others less so. For example, city-employee contracts expire in 2027, and unions understand the primary way for Lurie to cut significant costs in a budget dominated by proscribed expenditures is to cut jobs. By proposing a solution for filling coffers by sticking it to corporations — San Francisco’s liberal voters typically love such measures, even if it works against the city’s interests — unions are offering the mayor a way to avoid layoffs.
The ballot measure offered by a bevy of unions, mostly representing city workers, is meant to counter an anticipated $300 million hit to San Francisco’s budget caused by President Donald Trump’s “Big, Beautiful Bill,” which cuts funding for local healthcare services.
As for Chan, she stands to benefit politically from her proposed law — which already is on the ballot for June due to a quirk in the city charter that allows just four supervisors to put an initiative in front of voters. Mailers supporting it will be allowed to feature her name and photo prominently just as she ramps up her campaign for Congress. She also retains the option of withdrawing her proposal, especially if the organized labor measure were to pass in June.
Chan didn’t respond to my request for comment. But State Assembly Member Matt Haney, who was responsible for the original CEO tax in 2020, when he was a supervisor, did answer my texts. Haney said he supports restoring the tax, especially if the alternative is cutting spending. “Relying on cuts alone would decapitate the city’s economic recovery, and so the city will need to secure new revenue,” he texted, adding that “asking huge companies to pay a tiny bit more on the overall sales they do in the city” is preferable to burdening middle-class San Franciscans and small businesses.
Haney, like Chan, is a reliable supporter of labor, and he said recently (opens in new tab)he’d consider running for state senate (opens in new tab) if the city’s current representative, Scott Wiener, moved up to Congress or didn’t run again for his current office in 2028. Haney told me it’s a “delicate balance” between securing new revenues and keeping the business climate vibrant. “I support the efforts to attract business to the city,” he said. “I’m sure there will be extensive conversations and negotiations between the mayor and the measure’s proponents.”
Haney’s last comment is telling. The mayor’s office declined to comment on the two measures, though Lurie can’t possibly be in favor of bumping up the CEO tax. “Negotiations” would suggest that the unions are looking for assurances on protecting their members’ jobs. Lurie, who whiffed earlier this year when he had the chance to stand up to labor, needs to get the unions and Chan to knock off their anti-business policymaking efforts.
It’s not exactly the “knife fight in a phone booth” Lurie has said he wants to avoid. But neither is it the entrenched City Family and its new boss happily working together either.
It’s going to be an interesting 2026.