Californians could have a lot more to like about Facebook following the company's initial public offering.
When the Menlo Park-based social media giant goes public, the associated financial effects could help the Golden State as it struggles to close a $9.2 billion budget deficit.
Since much of California's revenue comes from personal income taxes, state officials are hoping for a big boost from the Facebook Effect. That's the name that's been given to the taxes expected to be collected from new millionaires and billionaires when they eventually sell their shares.
Some optimistic numbers crunchers, most notably those with California's nonpartisan Legislative Analyst's Office, estimate that the state could gain more than $1 billion from the Facebook deal over the next several years.
Political spending wish lists: Those projections have already led to the expected political jockying for the yet-to-materialize money in the state capital.
Democrats in Sacramento want any extra Facebook IPO money to ameliorate cuts in social services.
Republicans want any extra revenue to go toward paying down the state's debt.
Future tax hike's effects: The possible revenue amounts also could change if Gov. Jerry Brown gets his tax way at the polls this November.
Currently, California millionaires face a 10.3 percent income tax. That includes the state's one percentage point tax for mental health services.
But Brown wants California voters to approve a tax increase on the state's wealthier residents.
Under the governor's proposal, Facebook millionaires could pay as much as 12.3 percent to the state on their new wealth.
Of course, there's no firm timetable as to when the added income will be realized.
Finance department spokesman H.D. Palmer told Politico.com that lawmakers need to realize that Facebook's IPO won't immediately result in "the Brinks truck backing up to the treasury."
Still, for a state that's been struggling to make ends meet, any prospect of future income is very welcome.
You also might find these items of interest:
- Zuckerberg's IPO tax break?
- Those wacky rich folk and their taxes
- This is why I hate ballot referenda
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Richard Rider
What is NOT being discussed is that any Californian cashing out their Facebook millions — almost all of which is capital gain — will likely flee the state to do so. Otherwise they will pay 10.3% CA capital gains tax — 12.3% if the Governor’s tax increase passes this November (retroactive to the first of 2012!).
Any sane person receiving such a one-time windfall will relocate for a year to another low/no tax state such as Nevada (relocating is quite legal) to take the gain.
We can only hope they later return to the not-so Golden State.
Ian
Like the previous commentor, the rich will always find a way to pay less taxes than the rest of us.