Meta strikes deal to keep Zuckerberg in California amid wealth tax vote

Meta Platforms has struck a deal with CEO Mark Zuckerberg to keep him living in California for eight years as the state votes on a ballot measure that could impose a one-time tax on billionaires.

The company said on Wednesday that Zuckerberg will receive non-voting shares he can sell to potentially foot a multibillion-dollar tax bill if Proposition 40 is approved.

In exchange, Zuckerberg has committed to remain a resident of California, or wherever Meta maintains its headquarters, for eight years.

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Zuckerberg, the world's sixth richest person according to Forbes, told Meta he was considering moving his primary residence outside California because the measure could expose him to a massive tax liability, potentially forcing him to sell voting shares to pay it.

Meta said a special committee of its board concluded it was "critically important" that Zuckerberg remain in a leadership role and continue to manage the company from its Menlo Park headquarters at a time of "unprecedented challenge and competition in our industry."

Proposition 40 asks Californians whether to impose a one-time 5 per cent tax on the state's billionaires, and needs over 50 per cent support to pass.

The state is home to as many as 250 billionaires collectively worth upwards of $2 trillion US.

Meta will issue a new class of non-voting Class C common stock in January 2027.

Zuckerberg, who has a net worth of about $240 billion, can immediately sell 20 per cent of the Class C shares he receives, representing 10 per cent of his overall economic stake in the company, allowing him to pay a potential tax bill from Prop 40 without losing voting control.

The company said it expects to need to raise "hundreds of billions of dollars" over several years to finance its AI-related growth plan.

Ballot measure debate

Backers say California's measure would generate $100 billion US for health care, food assistance and education.

But skeptics peg the revenue estimate at closer to $40 billion US and say it could also drive some billionaires out of the state, depriving California of future tax revenue and investment.

Google co-founder Sergey Brin has spent more than $100 million US to defeat the ballot measure.

"I fled socialism with my family in 1979 and know the devastating, oppressive society it created in the Soviet Union. I don't want California to end up in the same place," Brin recently told the New York Times.

Darien Shanske, a law professor at the University of California-Davis who helped draft the proposal, told CNBC that relocating wouldn't limit the tax exposure of the ultra wealthy.

Any billionaire residing in the state on Jan. 1 would still be taxed, given the state's tax laws, he said.

Prop 40 is supported by, among others, California Democrat Ro Khanna in the House of Representatives and independent Sen. Bernie Sanders of Vermont.

"Are we destined to live in an oligarchic society begging for crumbs while our economic and political lives are controlled by a handful of the wealthiest people on Earth?" Sanders said at a rally in California earlier this month.

The measure hasn't elicited a tidy split of progressives and Democrats in favour versus billionaires against, however.

Nvidia CEO and co-founder Jensen Huang has shrugged off the proposal.

"The fact that I can afford to pay $8 billion in taxes over five years is a privilege," Huang told CBS News earlier this week. "I feel it's a privilege. It's a responsibility. And nothing would give me more joy than to be able to pay even more taxes."

Meanwhile, outgoing Democratic Gov. Gavin Newsom opposes Prop 40 and backs a separate measure that would seek to amend the state constitution to ban such tax proposals after Jan. 1, 2026.

But current Democratic gubernatorial candidate Xavier Becerra and the California Teachers Association are also among the individuals and groups opposed to the measure, arguing that while well-intentioned, it is a complex and unsustainable funding measure.

California voters have only approved one in three citizen initiatives historically.

"California ballot measures tend to lose support over time, and if it's polling below 50 per cent in August, that's not a good sign for its prospects," John Pitney, a professor of politics at Claremont McKenna College, told Reuters in a report published Sept. 30.

A Citrin-Politico poll released this week indicated that, of those who took a position, 46 per cent of survey respondents favoured Prop 40 while 43 per cent were opposed.

With files from CBC News and BNN Bloomberg