California's Facebook Windfall

May 18, 2012
Originally published on May 20, 2012 9:21 am

Mark Zuckerberg is, among many other things, the highest-profile taxpayer on the planet today.

After today's Facebook IPO, Zuckerberg will owe nearly $200 million in California state taxes alone. That's "among the largest tax liabilities that a single individual has ever paid at a given point in time," says Jason Sisney of the California State Budget Legislative Analyst's Office.

Zuckerberg's profits will be taxed at a 10% rate in California. That's a much higher rate than in many other states.

In all, Facebook's employees and early investors are expected to pay about $2 billion in California state taxes over the next 13 months. But California is almost 16 billion dollars in the hole. Facebook won't solve that problem.

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Facebook's IPO made a lot of money for the company's founders and many of its employees. But there's another big beneficiary of this new Facebook wealth: the state of California. NPR's Zoe Chace, with our Planet Money team, has that story.

ZOE CHACE, BYLINE: The highest profile taxpayer in California right now...

JASON SISNEY: I have to say we don't typically talk about the state tax liabilities of a specific person.

CHACE: Jason Sisney is with the California Legislative Analyst's Office. He's talking about Facebook founder Mark Zuckerberg, who today got several billion dollars richer. Some portion of that is going to go to the state in taxes.

SISNEY: They may be among the largest tax liabilities that a single individual has ever paid at a given point in time, and they're quite extraordinary.

H.D. PALMER: One man generating $195 million in personal income tax, that's not insignificant, to put it mildly.

CHACE: H.D. Palmer is a spokesman for the California Department of Finance. Zuckerberg's profits will likely be taxed at a 10 percent rate in California. That's a much higher rate than many other states. And, of course, Zuck is not the only one with Facebook shares. There are thousands of Facebook employees. They will be selling stock. Here's Sisney.

SISNEY: So let's say it's around $2 billion over the next 13 months.

CHACE: Two billion dollars from one company's IPO. But California's budget needs way more than that.

SISNEY: We have a pretty significant budget problem.

CHACE: California is $16 billion in the hole right now. That's the biggest deficit of any state, and California also has a structural deficit. That means every year it spends more than it brings in.

SISNEY: And Facebook will not play a role in that.

CHACE: In other words, Facebook is a onetime shot - two billion this year but not next. And some Facebook people don't want to play a role at all. Eduardo Saverin, one of Facebook's founders, he's moved to Singapore and renounced his citizenship. So he's not paying some of those capital gains taxes. Jack Abraham can understand the impulse. He founded a startup,, that was bought by eBay a year and a half ago, and he remembers that first tax day.

JACK ABRAHAM: I remember that day, and I remember writing this check. I pray to God that they spend it well.

CHACE: Abraham is not planning to leave California. But when a lot of the money that the state is spending came from you personally, it changes the way you look at state spending.

ABRAHAM: One of the things that changed for me after the acquisition was I had to commute down to eBay, and I hadn't had a commute before. And you start noticing little things like the roads aren't paved. There's traffic all the time. And no one is doing anything about this. The education system here is one of the poorest in the country. And it does upset you.

CHACE: So why are all these tech companies coming to a place like California - huge deficits, high taxes? Because, says Jason Sisney, come on, it's California.

SISNEY: If you even think about the movie that was made about Facebook...


SISNEY: was a really big deal when Zuckerberg and others decided to move to California.


CHACE: Sure, the taxes are high, but a lot of people figure you're paying for the lifestyle. Zoe Chace, NPR News.

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