Sacramento: Mark Zuckerberg made a deal with Meta's board to help him pay a proposed California tax on billionaires without losing his ownership stake in the company he founded, according to regulatory filings published this week.
If passed by voters in the November 3 election, the measure would levy a one-time 5 per cent tax on the wealth of Californians whose net worth exceeds USD 1 billion. Zuckerberg is the sixth-richest person in the world with a net worth estimated at more than USD 220 billion, according to Forbes. That would put his tax liability at more than USD 11 billion.
Actions announced by the tech giant on Wednesday will keep Zuckerberg as the majority owner of the company -- and also give him the ability to sell some of a new class of non-voting shares "for any reason", including to pay potential bills from the wealth tax.
The compromise came after Zuckerberg told the board he was considering selling his Palo Alto home last month in anticipation of the proposed tax. But he later struck the deal and committed to staying in California for eight years, unless "material unforeseen circumstances" arise that make it "prudent or advisable for him to reside elsewhere", according to the filings.
A few hundred billionaires live in California, according to the nonpartisan Legislative Analyst's Office. The tax would apply to anyone with a primary residence in the state as of January 1, 2026.
Most of the money would be used to backfill federal funding cuts to healthcare, and 10 per cent of it would go toward education and food-assistance programmes. Proponents, including SEIU United Healthcare Workers West and Vermont Sen. Bernie Sanders, say it would help ensure the ultra-rich pay their fair share.
But opponents, including California Governor Gavin Newsom, a Democrat, have warned it could prompt the state's wealthiest to leave the state. That could cause budget problems down the line because the state relies heavily on the rich for income tax revenue.
SEIU United Healthcare Workers West said the Zuckerberg deal proves opponents wrong.
"This is the nail in the coffin to months of scare tactics claiming that billionaires are fleeing California," Suzanne Jimenez, the union's chief of staff, said in a statement.
Zuckerberg's deal with Meta offers another glimpse into how the ultrawealthy are bracing for the proposed tax, which targets the main way they make money, through their investments, instead of by raising taxes on the paycheck they receive from work. Other billionaires have taken a different approach by starting to cut ties with the state, including Google co-founders Sergey Brin and Larry Page.
Brin and other tech moguls and venture capitalists have poured millions into a political action committee opposing the proposed tax and backing other ballot measures designed to nullify it. The committee, Building a Better California, has raised more than USD 333 million, 30 per cent of which has come from Brin. By comparison, the "Yes on 40" campaign has raised USD 32.7 million.
Zuckerberg has taken a salary of USD 1 each year since 2013 as Meta's CEO. In its regulatory filings, Meta maintained that Zuckerberg would not receive additional compensation -- and argued that he would "effectively be paying to serve as the company's chief executive officer while residing in California" if the state's wealth tax is enacted. The company said the new stock he will be allowed to sell -- representing 10 per cent of his overall economic stake in the company -- would help mitigate that.
Beyond securing Zuckerberg's future in California, Meta's new class of shares is intended to boost the company's ability to raise capital for its investments in artificial intelligence infrastructure, according to the filings. Meta also said it established the new shares for employee compensation and acquisitions, among other reasons.
"It will expand our funding tools and give us flexibility to invest behind the unprecedented momentum we are seeing across every part of our business driven by AI," Meta Chief Financial Officer Susan Li said on an earnings call.