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San Francisco has passed a first-of-its-kind tax on big businesses — like Square and Stripe — to help the homeless

The contentious measure, Prop C, has divided tech leaders.

A homeless man begging for change in San Francisco. Justin Sullivan / Getty

San Francisco voters passed a measure that has divided the tech community and sparked a national debate about the industry’s responsibility to fix the city’s homelessness crisis. The San Francisco Chronicle called the race at 60 percent in favor with 99 percent of the vote counted.

Proposition C will raise the city’s gross receipts tax by an average of .5 percent on annual gross receipts over $50 million that companies like Square, Lyft and Salesforce generate. The new funds will bring in an estimated $250 million to $300 million a year — twice what the city currently spends on an annual basis to help the homeless in tech’s de facto capital.

The thousands of people living on San Francisco’s streets serve as a daily reminder of economic inequality in a city that has one of the highest concentrations of billionaires in the nation. Earlier this year, a United Nations expert on housing called the living conditions of the homeless in the Bay Area “cruel” and “unacceptable.”

The decision to increase funding for the city’s most needy is a victory for the local nonprofits behind the measure and their tech fairy godfather, Salesforce CEO Marc Benioff, who, along with his company, has poured more than $7 million into the campaign in the month leading up to the election.

But it’s a loss for many tech companies that have opposed the measure — including Square, Lyft and Stripe — citing concerns echoed by new San Francisco Mayor London Breed over accountability of how the new funds will be spent.

The vote comes at a time when politicians and local nonprofits are increasingly calling on tech leaders to become more charitable and civically engaged members of their communities.

“Tech has been the greatest generator of wealth in our generation, and when you look at that, you have to say, what is your responsibility?” said Leslie Miley, a former director of engineering at Slack, who voted yes on Prop C. “How progressive can you be when you walk by people living on the streets and not bat an eyelash? All I know is doing nothing is no longer an option.”

In the weeks leading up to the vote, Benioff drew national attention to the campaign by publicly spatting with other tech titans who publicly opposed Prop C, including Jack Dorsey, Stripe CEO Patrick Collison and Zynga founder Mark Pincus. Speaking onstage at the WIRED25 conference last month, Benioff said, “You’re either for kids and homeless, or you’re for yourself.”

Opponents of Prop C have argued that the decision is a more nuanced one — pointing to the resources that the city already gives to the homeless and questioning if simply spending more money on the problem is the right approach.

“If homelessness was just a question of money, this issue would already be solved,” wrote Collison in a company blog post last month.

Benioff himself initially voiced concerns about the measure in private conversations, as Recode previously reported. But he said that after weighing the city’s economic analysis — which found that the money would significantly reduce the homeless population — and talking to local housing activists, he decided to support it.

Square and Stripe in particular have been tech’s most vocal opponents of the measure. Dorsey tweeted that Square would likely be taxed at disproportionately higher rate of total revenue than software companies like Salesforce. That would be due in part to a complex city tax structure that categorizes Square as a financial services company rather than an information services firm, among other reasons.

Proponents of Prop C argue that tax categorization is a larger issue that shouldn’t hold up funding the homeless, and that Twitter and some other tech companies have actually benefited from specialized tax subsidies over the years. In 2011, when San Francisco was trying to encourage more tech firms to keep their headquarters in the economically beleaguered mid-Market neighborhood, the city agreed to temporarily exempt companies like Twitter from paying payroll taxes. Those tax breaks are set to expire next year.

Another complication to the Prop C saga: Even though the measure passed, it could face legal challenges before it is set to be enacted this January. Currently, there are pending legal cases in California that some argue could invalidate tax measures for specific purposes that didn’t pass with a two-thirds majority vote, such as Prop C.

One thing that’s clear from today’s vote is that many voters in San Francisco are calling for big businesses to give back at a higher rate than they do now. Whether Prop C can effectively compel companies to do so legally remains to be seen.

Update: An earlier version of this article stated that Proposition C had passed before it was officially called.

This article originally appeared on Recode.net.

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