When San Francisco’s labor unions put the Overpaid CEO Tax on the June ballot, they were betting that an AI boom and looming federal cuts would push voters to demand that corporations pay more.

They were wrong. With two-thirds of returned ballots counted through the end of the week, Proposition D is likely going to be rejected by a double-digit margin. 

The looming defeat marks a rare loss for the city’s most powerful unions — among them, SEIU 1021 and IFPTE Local 21 — which led the campaign and won endorsements from the state’s leading Democratic candidates for governor, Nancy Pelosi, and a supermajority of the Board of Supervisors.

The loss caught labor insiders by surprise. San Francisco voters, for two decades, have embraced higher business taxes at nearly every turn. Meanwhile, corporations — often splintered along industry or generational lines — were regularly defeated at the ballot box. 

But this time, the business community put up a real fight, with billionaires Chris Larsen and Michael Moritz (chairman of The Standard) cutting six-figure checks, and organizations like Advance SF airing negative TV ads during the NBA playoffs. 

But the person who pushed the “no” campaign over the top was Mayor Daniel Lurie. 

A Chamber of Commerce poll showed support for Prop. D was ahead in the race leading up to the election. Almost half of voters, however, were not aware that the popular mayor was opposed to the measure. This gave the business coalition the data point it needed to approach Lurie’s team and argue that the mayor should become the face of the anti-tax campaign. 

“Let’s go, San Francisco” became “Let’s go defeat that darn tax.”

“We knew turnout was going to be more last minute because of the uncertainty surrounding the governor’s race,” said a source involved in the No on D campaign. “So we called in the Lurie cameo at the end.” 

From a business perspective, Lurie saved the city from Prop. D. But he also had a role in getting it on the ballot in the first place. Behind-the-scenes negotiations, which The Standard is reporting in detail for the first time, point to a key weakness in the mayor’s political armor. 

Sources say Lurie threw the business coalition and labor unions into a room together, walked away, and essentially told them to figure it out themselves.

For decades, mayors have embraced the role of chief negotiator, but Lurie has shied away from it. For example, in February, he sent his subordinates to broker peace between the United Educators of San Francisco and the San Francisco Unified School District, but they failed to avert a strike. 

In the case of Prop. D, Lurie didn’t even go to bat. 

Left to its own devices, the business lobby tried to deal with the unions directly, warning them of the dire economic consequences for San Francisco if it were to renege on the business tax reform passed in 2024. That reform was viewed as a grand bargain between major business and labor factions and was born of a fragile truce forged for the sake of the city’s economic future. The conversations to salvage the bargain hit a wall, sources said.

With a solution nowhere to be found in the days before the Feb. 2 deadline to submit signatures to the city’s Department of Elections, Lurie asked Larsen, Boudin Bakery scion and veteran civic dealmaker Lou Giraudo, and former City Administrator Ben Rosenfield to intervene and negotiate with the labor unions. 

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The three men were regarded by both sides as neutral brokers. 

The last-minute negotiation sessions, sources say, were an attempt to salvage as much of the 2024 bipartisan tax reform as possible while finding room for a partial rate restoration to generate new revenue.

Sources briefed on those talks said the unions wanted the business lobby to agree to tax hikes that could generate at least $200 million in annual revenue, as well as a guarantee against layoffs of city workers during 2027 budget deliberations. 

The mediators countered with a best-and-final offer of between $100 million and $150 million, but pushed for their own protections, including a sunset clause on tax increases and guarantees that the unions would not pursue future tax hikes. 

On Jan. 30, just two days before the deadline to submit petitions to the Department of Elections, the labor coalition submitted Prop. D for the ballot, despite the mayor’s pleas against it. 

“Business didn’t have a track record of fighting, let alone winning, so why not take more at the ballot box?” said a source who worked on the 2024 business tax reform and opposed Prop. D. 

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The proposed measure went beyond any of the compromise negotiations, proposing an Overpaid CEO Tax rate higher than the one voters approved in 2020. Without factoring in any potential exodus of companies from the city, the Prop. D coalition said the new tax would generate up to $300 million in annual revenue. 

The Chamber of Commerce, fearing that Prop. D would derail the city’s fragile economic recovery, countered by placing a competing measure on the ballot, Prop. C, which would lock in reduced rates negotiated in 2024 and expand exemptions for small businesses. Had both passed, the measure with more votes would have gone into effect. 

Voters rejected both. The Yes on C, No on D campaign spent roughly $6 million (opens in new tab).

Standing outside Original Joe’s in North Beach on Tuesday, Lurie spun the pending results as proof that “San Franciscans like the direction that we are going in.” 

Alongside the failures of Propositions C and D, all of the mayor’s endorsed candidates won their races, giving him even stronger support in his second year. It will strengthen Lurie’s hand when entering into contract negotiations next year, when City Hall’s public-sector unions will likely demand raises, especially in light of the 14% raises police officers received just two months ago (opens in new tab). 

But political and business insiders say that while labor is down, it’s not out. The consequences of this fight will reverberate into 2027, when public-sector unions negotiate their next contracts with Lurie. 

When they do, they will be legally allowed to strike for the first time in 50 years. If Lurie had helped them avert layoffs with a compromise tax measure, it may have softened the blow, taking the wind out of a possible strike. 

Now, labor unions are holding a weak hand — and that’s when they’re at the fiercest. 

“I’ve watched mayors come and go,” said Mike Casey, president of the San Francisco Labor Council. “I’ve watched popularity rise and fall. I’ve watched labor with our backs against the wall, in difficult fights.” 

“My money,” he said, “is going to continue to be on working people.”