Mark Zuckerberg threatened to leave California over wealth tax
Meta CEO Mark Zuckerberg warned he would move out of California if voters approve a proposed billionaire wealth tax, prompting the company to create a new stock class to help him pay the levy without losing control.
In a regulatory filing, Meta revealed that Zuckerberg told the company he was "evaluating relocating his primary residence outside California" if Proposition 40 passes. The proposed tax would impose a one-time 5% state tax on billionaire wealth, potentially costing Zuckerberg about $12.4 billion of his estimated $247 billion net worth.
Corporate Response
Because Zuckerberg's presence near Meta's Menlo Park headquarters is "critically important" to the company's success, Meta's board approved a new class of nonvoting common stock that Zuckerberg can sell to raise cash to pay the wealth tax. Without this change, Zuckerberg would have had to sell voting shares, reducing his control of the company.
Meta plans to issue nonvoting shares to fund AI investments without diluting CEO Mark Zuckerberg's control.
Tax Impact
The billionaire tax, known as Proposition 40, aims to raise $100 billion from California's wealthiest residents to shore up the state's healthcare system. However, Stanford University economists have questioned whether the tax could backfire, noting that several billionaires have already left the state, potentially reducing projected tax collections.
In exchange for the new stock arrangement, Zuckerberg has committed to remaining a California resident for eight years. If Meta moves its headquarters to another state, Zuckerberg will relocate to that jurisdiction. The nonvoting Class C common stock, effective in January, will also help Meta raise capital for AI infrastructure investments, compensate employees, and make acquisitions.
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