Meta Platforms has reached an agreement with Mark Zuckerberg, as revealed by Reuters, responding to a California ballot initiative amid the Nov. 3 midterm elections that has triggered intense debate and significant campaign expenditures.
According to Meta, Zuckerberg will receive non-voting shares that he can potentially sell to cover a multi-billion-dollar tax liability if the proposal is approved. In return, he commits to being a resident of California or Meta’s headquarters location for the next eight years.
Zuckerberg, ranked as the sixth wealthiest individual globally by Forbes, expressed concerns about potentially relocating his primary residence outside California due to Proposition 40, also known as the “California wealth tax,” which could result in substantial tax obligations, possibly necessitating the sale of voting shares.
Proposition 40 seeks to impose a one-time 5% tax on California’s billionaires and requires majority support to pass. The state is home to around 250 billionaires with a combined net worth exceeding $2 trillion.
Proceeds from the tax would primarily benefit state health care programs, with additional funding allocated to food assistance initiatives and public education.
Meta, the parent company of Facebook and Instagram, emphasized the importance of Zuckerberg’s continued management from the Menlo Park headquarters, citing unprecedented challenges and competition in the industry. The company aims to raise “hundreds of billions of dollars” over several years to finance its AI-related growth strategy.
In January 2027, Meta plans to issue a new class of non-voting Class C common stock. Zuckerberg, with a net worth of approximately $240 billion, can immediately sell 20% of the Class C shares, equivalent to 10% of his total economic stake, to address potential tax obligations from Proposition 40 without relinquishing his voting control.
Supporters of California’s measure argue that it could generate $100 billion for health care, food assistance, and education. However, skeptics suggest the revenue estimate may be closer to $40 billion and could lead some billionaires to leave the state, impacting future tax revenue and investments.
Google co-founder Sergey Brin has invested over $100 million to oppose Proposition 40, expressing concerns about the tax measure potentially leading California down a path of oppressive socialism.
Darien Shanske, a law professor at the University of California-Davis and a contributor to the proposal, emphasized that relocating would not shield ultra-wealthy individuals from tax obligations under California’s laws.
Proposition 40 has garnered support from California Democrat Ro Khanna and independent Senator Bernie Sanders, who raised concerns about the concentration of wealth and power among a few individuals.
The fate of the measure remains uncertain, as it has not generated a clear divide between progressives and Democrats in favor and billionaires against. Some prominent figures, like Nvidia CEO Jensen Huang, have expressed willingness to pay substantial taxes, viewing it as a privilege and responsibility.
Outgoing Governor Gavin Newsom opposes Proposition 40 and supports Proposition 42, introduced by Brin, aiming to amend the state constitution to prevent similar tax proposals after 2026. The proposition has also faced opposition from various groups, including Democratic gubernatorial candidate Xavier Becerra and the California Teachers Association.
California voters historically have a mixed record with citizen initiatives, with only one in three being approved. Analysts suggest that early robust support is crucial for ballot measures to succeed, as undecided voters tend to lean towards voting against propositions.
Recent polling data indicates a close split among Californians regarding Proposition 40, with 46% in favor and 43% opposed. This suggests a challenging path for the measure as it approaches the ballot.
