San Francisco Wants To Force CEOs To Pay for a Citywide Free Mental Health Care Program

The new tax won't come close to fulfilling the steep funding needs of Mental Health SF

San Francisco politicians want to offer tax-funded mental health care to all city residents, and they're expecting companies with well-paid CEOs to foot the bill.

On June 11, six of the 11 members of the Board of Supervisors introduced a motion to put a new tax on "disproportionate executive pay" before San Francisco voters in November. Companies that pay their chief executives 100 times the median compensation of their employees would pay an additional .1 percent tax on gross receipts, in addition to the .3 to 1.3 percent gross receipts taxes they currently pay. The tax will increase incrementally to an additional .2 percent for firms that pay their chief executives 200 times their company's median employee compensation. The new tax would cap out at .6 percent for companies with chief executives who earn 600 times the company's median employee compensation.

This tax would fund another program slated to appear on the ballot in November, called Mental Health SF, which "will create a 24 hour, 7-day-a week" mental health services system "that will offer immediate care to any San Franciscan who needs it," said Supervisor Hillary Ronen when she first floated the policy in late May.

"We have a crisis of people who are severely addicted to drugs and that have severe mental health illnesses that are wandering the street and that desperately need help," Ronen said in an interview with KQED.

To be placed on the ballot, both proposals need support from at least six of the board's 11 supervisors. Both measures have that support, and the Board of Supervisors is expected to vote to place them on the November 2019 ballot by the end of July. The CEO tax question would require two-thirds support from San Francisco voters to pass because it is for designated spending. The Mental Health SF question requires only a simple majority of voter approval to pass.

If the mental health initiative passes and the tax fails, the city would likely need to find another way to fund the program.  

In an interview with the San Francisco Chronicle editorial board, Ronen and fellow Supervisor Matt Haney said they would try to get more money from the state if the CEO tax does not pay for the mental health funding. 

They might need to do that anyway, as the revenue from the CEO tax would likely not cover the total cost of Mental Health SF.

The city's Public Health Department estimates that the Mental Health SF proposal will cost between $244 million and $1.1 billion annually, reports the San Francisco Chronicle. Those estimates, the Chronicle notes, don't include the $278 million required to build or establish a new mental health drop-in center that the program would require. Meanwhile, the CEO tax is estimated to only bring in $140 million, according to the city controller's office. San Francisco currently spends $370 million per year on mental health services, according to USA Today. 

In addition to the funding problems, there's also the question of who would be eligible for publicly funded care. "Among the many questions that seemed to trip [Ronen and Haney] up during a Monday meeting with our editorial board: Who, exactly, would qualify for the free care? What would be the residency requirement?" the Chronicle editorial noted.

Lastly, the new CEO tax being put forward to fund this proposal could well see highly nimble corporations choose to leave the city or reduce their presence there, warns Jared Walczak of the Tax Foundation.

Corporations "might well reduce their footprint in the city of the tax burden grows too onerous," Walczak. "Many businesses clearly want to be in San Francisco but as the diffusion of tech clusters demonstrates, there are limits."

In the last couple of years, San Francisco has seen companies leave to open up headquarters in places like Salt Lake City and Austin—places that have much friendlier business taxes and lower costs of living.

What's more, San Francisco voters passed the largest tax increase in city history just last November. Raising taxes again could drive away businesses and shrink the tax base, thereby reducing revenue and making it difficult to pay for existing programs, much less new ones.