How Facebook going public could help Calif.

3:03 PM, May 18, 2012   |    comments
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MENLO PARK, CA - When Facebook CEO Mark Zuckerberg rang NASDAQ's opening bell, many of his employees became instant millionaires.

Because most of them live in California, the state budget will get a boost.

California treats capital gains like wages, so they'll be taxed at the rate of 9.3 percent. Gov. Brown believes that'll bring in about $1.5 billion through June 2013 based on stock at $35 a share.

It closed higher on day one of trading.

The most immediate benefit will be from Zuckerberg himself who filed with the Securities and Exchange Commission he was optioning 60 million shares.

"Based on the state's current tax, the exercise of his options alone will generate $195 million in personal income tax revenue in the state of California. From one individual alone!" ssaid H.D. Palmer, spokesman for the California Department of Finance.

The state budget is expected to get a bigger windfall in six months when restrictions expire on Facebook employees and they can begin selling their stock.

But the non-partisan Legislative Analyst whose latest report reveals some of Brown's budget numbers are off, warns it's hard to tell what workers will do and when.

"We don't know what their tax strategy and tax mitigation, tax avoidance are ... whether they set up foundations; they delay their sales, they have other strategies," said Mac Taylor, Legislative Analyst."That's just another unknown." 

If voters approve the governor's tax measure in November, Facebook workers could see their taxes jump up another 3 percent, adding another $400 million to California's treasury.

The last windfall for state coffers was when search giant Google went public in 2004, leading to $7 billion in extra taxes over three years.

As much as all this money sounds great, it's not enough to erase the $16 billion deficit.

"The Facebook IPO revenues are lessening the blow ... that said, we still got a big gap to close," Palmer said.

If you thought Zuckerberg's state tax bill was high, his federal tax bill is even higher. It's expected to be more than $700 million.

Nannette Miranda
ABC7

ABC7

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