The US state of California is the headquarters of most large US technology companies. About 225 billionaires live there, according to the campaign group Americans for Tax Fairness. One of them is Meta boss Mark Zuckerberg.
His fortune is estimated at more than $200 billion. In addition to various other properties in Florida, Hawaii and Ireland, Zuckerberg has at least two houses in California, one at the company headquarters in Palo Alto and one on picturesque Lake Tahoe.
Money for education and health
In the midterm elections on November 3rd, voters in California could now vote for a tax on the rich, which could be expensive for Zuckerberg. Behind “Proposition 40” on the ballot is a one-time tax of five percent for residents with a net worth of more than a billion dollars.
The proceeds are intended to flow specifically into schools and healthcare. The Facebook co-founder would have to pay around ten to twelve billion dollars in additional taxes to the state. You can then think about moving.
Zuckerberg threatens to move away
In any case, Mark Zuckerberg is said to have threatened to move out of California. In doing so, he wrested a deal from Meta management that made it easier for him to stay, said financial journalist David Lazarus on the regional station KTLA5.
According to the New York Times, he is said to have given the board of directors an ultimatum: Either the company would pay the potential wealth taxes or he would sell his house in Palo Alto and move away.
A new class of shares for the boss
A financial release from Meta states that after “intensive” and “sometimes controversial” negotiations, Zuckerberg was given the opportunity to purchase additional shares. This is intended to offset his financial losses should he have to fork out the additional tax. In return, Zuckerberg agrees to continue living in California for at least the next eight years.
This is a new class of shares without voting rights, which does not reduce his existing voting rights share of 60 percent. Zuckerberg could sell shares to raise money for taxes without losing influence in the company. The new category of shares will be created by splitting existing shares at a ratio of two to one and will be traded from January.
“Critically important”
Meta emphasized that it is "critically important" that Zuckerberg continues to run the company from California given the "dramatic and unprecedented transformation" currently taking place in the technology industry and the global economy related to artificial intelligence.
The company is apparently alluding to difficulties that arose during the Covid-19 pandemic, when Zuckerberg mostly worked from his “home office” from his property on Kauai in Hawaii.
No debate about boss privileges desired
According to financial journalist Lazarus, the board of directors was frightened by the idea that Zuckerberg could actually officially offer his house in Palo Alto for sale.
That would have caused quite a stir and perhaps not only been unpleasant for the company; it could also have prompted employees to discuss their boss's privileges - which of course he also had. This was apparently an absolute no-go for the board of directors.
Will the reputation get even more damaged?
But whether it would be good for Zuckerberg's reputation if he let the other shareholders indirectly pay for his one-time tax on the rich - because their share of Meta's total corporate profits would shrink while Zuckerberg's control would remain untouched - is a completely different question, says Lazarus.
The tax on the rich means a lot of money even for a billionaire. But the proceeds are earmarked for education and healthcare - these are certainly not bad areas that a wealthy person could support.
Tech billionaires are mobilizing
Current surveys show that the tax on the rich is currently unlikely to find a majority among eligible voters in California. Numerous tech billionaires - including Google co-founder Sergey Brin, Palantir co-founder Peter Thiel and former Google CEO Eric Schmidt - have invested large amounts of money to combat this.
Zuckerberg's agreement with Meta should also remain in effect if the rich tax does not apply. The agreement is designed to last eight years - as long as Zuckerberg maintains his residence in California.
