Meta’s CEO Mark Zuckerberg is seriously considering relocating outside of California if Proposition 40 passes, which would impose a 5% wealth tax on billionaires. This potential tax could require him to sell a significant portion of his stock, according to a recent financial disclosure.
The company’s filing with the Securities and Exchange Commission detailed Zuckerberg’s concerns over the wealth tax affecting his control of Meta, and indicated that he might sell his $110 million Palo Alto home and establish residency elsewhere. The filing, lengthy at 109 pages, opened a window into his apprehensions regarding the tax and its implications.
During discussions with the board, Zuckerberg expressed that the tax on his estimated $250 billion net worth could result in a tax bill of around $12.5 billion, forcing him to sell stock and thereby dilute his voting shares.
Zuckerberg holds a 13% stake in Meta, which comprises Class B shares that grant him majority voting rights. The SEC filing notes, “Mr. Zuckerberg highlighted that since 2013, he has taken only a $1 annual salary while serving as CEO. He mentioned that any tax obligation resulting from offloading his Class B shares could substantially diminish his voting power to about 53%.”
Conversations about Proposition 40 intensified in July, as Zuckerberg raised concerns with key figures, including Meta’s lead independent director Robert M. Kimmitt, indicating that the wealth tax could complicate his decision to remain in California.
His legal team sent a letter to a special committee in August, requesting an adjustment to his compensation structure to provide him with more liquidity in light of the extraordinary tax burden he might face. Zuckerberg signaled his intention to put his Palo Alto home up for sale by mid-September to relocate before the November election, expressing a desire to avoid lengthy negotiations if the tax expands to other areas.
The filing detailed Zuckerberg’s plan to stay with the company but explained the urgency of taking steps to move by mid-October in response to the tax proposal. Meta outlined a plan for recapitalization to ensure Zuckerberg maintains his leadership position among changes at the company.
Zuckerberg’s disclosures arrived alongside a report revealing a 26% increase in Meta’s annual revenue for the second quarter. He’s not the first billionaire to react to California’s wealth tax; similar sentiments were echoed by other wealthy individuals, prompting them to consider relocating. Sergey Brin, co-founder of Google, has already changed his residency to Nevada, spending extensively to defeat the billionaire tax. Other notable figures, including former Google CEO Eric Schmidt and cryptocurrency entrepreneur Chris Larsen, have also contributed significantly to anti-wealth tax efforts.
Recent polling indicates Proposition 40 is close to gaining a majority, with 46% of voters supporting it and 43% opposing it. Additionally, propositions backed by Brin could create hurdles for the wealth tax if they receive sufficient votes.
