The Tech Backlash Just Hit San Francisco. Where Next?

Proposition C, which will raise an additional $300 million a year for homeless services, was approved with roughly 60 percent of the vote.
Image may contain Marc Benioff Human Person Man Clothing Apparel and Sitting
Salesforce CEO Marc Benioff was a major proponent, and big financial backer, of Proposition C.Aflo Co. Ltd./Alamy

There is perhaps no greater example of Silicon Valley’s soft power than watching a debate around a grassroots proposal to fight homelessness transform into a Twitter war between tech billionaires and their preferred form of taxation. Rob Reich, author of the new book Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better, called the drama around San Francisco’s Proposition C just as much a sign of our absurd times as New York governor Andrew Cuomo’s offer to rename himself “Amazon Cuomo” if it would inspire Jeff Bezos to put Amazon’s second headquarters in New York.

Even in the midst of a tech backlash, “the deference to economic power is still strong” among elected officials, says Reich, a Stanford political science professor. But on Tuesday, voters most familiar with Big Tech’s longterm impact refused to capitulate. Nearly 60 percent of San Francisco voters supported Prop C, which is projected to double the city’s budget for homeless services, raising an additional $300 million a year through a gross receipts tax on roughly 400 companies, including Square and Salesforce, whose billionaire CEOs bickered online about the initiative.

The Prop C results could be interpreted as a referendum on the homelessness crisis rather than an effort to hold Big Tech accountable. After all, Prop C had broad support from advocacy groups and led in polls throughout the campaign. Jennifer Friedenbach, executive director of the Coalition on Homelessness, the nonprofit that drafted Prop C, says the tax was designed as an equitable solution, working backward from the amount needed to address the humanitarian needs. “We were really just interested in saying, ‘Look, San Francisco is a very affluent town and we have destitute people living in the shadow of that affluence,’” she says. “I think San Franciscans are saying, ‘Hey, let’s tax the rich and house the poor.’ It’s pretty simple.”

But the success of similar ballot initiatives to tax tech companies elsewhere in the Bay Area suggests a different interpretation.

In East Palo Alto, which has long struggled to attract businesses of any kind, nearly 77 percent of voters supported Measure HH, a tax on commercial office space expected to raise roughly $1.7 million for low-income housing and training programs for city residents. In Mountain View, nearly 70 percent of voters supported Measure P, a per-employee “head tax” that is expected to raise $6 million a year—roughly half of that from the city’s largest employer, Google—to fund transportation, affordable housing, and services for the homeless.

Taxes on gross receipts or employees are a function of California’s original sin, Proposition 13, a 1978 law that restricts the property taxes that typically fund local government. If, in a couple of years, Amazon Cuomo finds that his namesake has done more harm than good, New York might have better options.

Still, these initiatives serve as beta tests of what shakes out when you apply direct democracy to Silicon Valley’s unelected leaders. It’s this political momentum, more than any tax, that worries the tech industry. The Bay Area votes suggest that Seattle’s approved, and then rescinded, tax on employees—read Amazon—won’t be the end of local efforts to hold tech companies accountable. Even voters concerned about keeping tech jobs in the region seem open to the idea that profitable companies should pay more.

“Our elected officials are still starry-eyed about tech companies,” says Maria Noel Fernandez from Silicon Valley Rising, a labor-backed group. “Most of these companies see little need to truly invest in the success of our communities unless they feel their reputation is being threatened or they're trying to get something out of local government.” She points to San Jose, where Google plans to open a major campus.

Fernandez highlighted a recent study showing that nearly nine in 10 workers in the region make less, after accounting for inflation, than 20 years ago. “The tech boom isn’t trickling down here, and I think patience is really running out,” she says. Absent action from elected representatives, ballot initiatives are the next best thing, she says.

“It’s unfortunate when the desire is to look for villains rather than solutions,” says Carl Guardino, who has served as the CEO of Silicon Valley Leadership Group, a business group, for more than 20 years. Guardino says the group recently asked 65 local political candidates if they would consider Mountain View’s head tax in their own city. “Almost no one said yes,” Guardino says. “I think a lot of elected officials realize that in the next economic downturn, which we all know is inevitable, folks are going to realize that having jobs is not such a bad thing.”

Fernandez and Friedenbach say the choice should not be either-or. “These companies are changing the way we operate as humans around the world, and you’re telling me we can’t figure out how grow in a responsible way with equality for communities? I don’t buy it,” Fernandez says.

Barry Lynn, director of the Open Markets Institute, who has had his own high-profile run-in with Google, says efforts to address the concentration of tech power have historically started at the local level. “I’m sure that whoever ends up burdened with Amazon is going to be figuring out ways to make Amazon pay within a couple years,” Lynn says.

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