Meta Agrees to Help Zuckerberg Pay Possible California Billionaire Tax
Chief executive commits to eight years in California as Proposition 40, a one-off 5% tax on about 250 billionaires, heads to voters
By AXY Business Desk ·
Key points
- Meta has struck a deal with Mark Zuckerberg to help him pay a possible California billionaire wealth tax, in return for an eight-year commitment to remain a resident of the state, or wherever Meta maintains its base.
- The deal relies on a two-for-one stock split that creates a new class of non-voting shares, which Zuckerberg can sell to pay a tax bill without giving up control of the company.
- Californians vote early next month on Proposition 40, a one-off 5% tax on roughly 250 billionaires, while Meta reported a 26% revenue rise and a 37% profit fall in the same period.
Meta has struck a deal with its chief executive, Mark Zuckerberg, to help him pay for a possible California wealth tax aimed at billionaires. The company behind Facebook, Instagram and WhatsApp disclosed the arrangement on Wednesday night. Under it, Zuckerberg will receive new shares that he can sell to cover a potentially multibillion-dollar tax bill, if California passes a one-off tax. In return, he has committed to remain a resident of the state, or wherever Meta maintains its base, for eight years.
The timing is tight. Californians will vote early next month on Proposition 40, known as Prop 40, which would impose a one-off 5% tax on the roughly 250 billionaires who live in the state. Meta's headquarters are in California, so the deal keeps its most senior executive tied to the place where the company is based, at least for the length of the pledge. It also means the vote is no longer only a debate about tax policy. It has become a question about the personal finances of one of the best-known executives in the technology industry, and about how a major public company is organised.
How the Share Deal Is Built
The mechanics are the heart of the arrangement, and they are more complicated than a simple payment. Meta has a share structure in which Zuckerberg's stake carries voting power, which helps him steer the company's biggest decisions. Votes are what give a shareholder control, so the shares that carry them are the ones that matter most here. If Zuckerberg had to sell those voting shares to meet a tax bill, his influence over the company could shrink.
To avoid that outcome, Meta is creating a new class of non-voting shares through a two-for-one stock split. A stock split increases the number of shares each holder owns, in proportion to what they already hold, while the price of each share falls to match. The split applies to all existing shareholders, not only to Zuckerberg. The new class, which the company describes as class C shares, would not carry votes. Zuckerberg will be able to sell some of these shares to pay a potential tax bill, and the company says this would not dilute his control.
For ordinary shareholders, the split changes how many shares they hold, but the new class does not come with a vote attached. The deal therefore gives the founder a way to raise cash from his holdings without handing over the votes that anchor his position. This could matter well beyond this one ballot. Founders of large public companies often have most of their wealth tied up in stock, and that makes a large tax bill hard to pay without selling shares. Meta has addressed that problem for its chief executive in a direct way.
Why Zuckerberg Said He Might Leave California
The company said Zuckerberg told Meta he was considering moving his primary residence somewhere else. His reason was Prop 40. He argued that the measure could expose him to a massive tax liability, which could in turn force him to sell voting shares to pay it. The share structure is designed to answer exactly that threat.
A primary residence is the place where a person legally and practically lives most of the time. Changing it can change where a person is taxed, which is why the threat of a move carries weight in a tax fight. The eight-year pledge is the other side of the bargain. Zuckerberg has agreed to remain a resident of California, or wherever Meta keeps its base, for that period. In practice, the company gets a long commitment that its leader will stay put, while the leader gets a way to pay a tax that could otherwise force him to give up control.
Forbes puts Zuckerberg's net worth at $239bn. At that scale, even a single-digit rate on a fortune of that size would produce a bill measured in billions of dollars. That is why the structure of his holdings matters as much as the rate itself. A large fortune held mostly in one company cannot be turned into cash quickly without consequences for the person who controls the company.
What Proposition 40 Would Tax
Proposition 40 is a ballot measure, which means voters decide it directly rather than the state legislature passing it. If it passes, it would apply a single 5% levy to billionaires living in California. Ballot measures are one of the main ways Californians change state law, and this one is aimed at a very small group of very wealthy residents.
The measure is described as a one-off tax, meaning it would be paid once rather than every year. That difference matters for people whose fortunes sit mostly in company shares. Even a one-time bill can require selling stock or borrowing against it, and the person paying may have to decide which assets to sell and when.
The measure has split the state's wealthy. Tech billionaires have been spending heavily to fight it, including Google co-founder Sergey Brin, Palantir co-founder Peter Thiel and former Google chief executive Eric Schmidt. Recent polling has shown that Prop 40 does not yet have majority support among voters. The Meta arrangement arrives while the outcome is still open, and while many voters may still be deciding how they feel about the measure.
For the roughly 250 people the measure would reach, the question is not only the rate. It is also how they would raise the cash. For a founder whose wealth is locked in one company, the answer depends on which shares they can sell and whether those sales affect control. The Meta deal gives voters a concrete example of how that problem can be handled inside a single company.
Khanna's Case and the Fight Over Fairness
Rohit Khanna, the US congressman representing California's 17th congressional district, has framed Prop 40 as a choice between standing with the working class or the oligarchs. In an opinion article last week, he argued that the real question is fairness in who pays.
"Every society is taxed. The only question is who will pay," Khanna wrote. He said working people pay more than they should, while billionaires are so unburdened that they are becoming trillionaires. In the America he wants, he wrote, billionaires and trillionaires would pay their fair share, and working people would be unburdened.
The Meta deal lands squarely in that argument. Supporters of the measure may see it as evidence that the wealthiest people can find ways around a tax, or at least soften its effect on their control. Opponents may see it as proof that the tax is hard on people who hold large stakes in growing companies and have no easy way to pay. Both readings are possible, and both sides now have a specific case to point to ahead of the vote.
Meta's Quarter as Legal Costs Mount
The share deal came as Meta reported its quarterly results. Revenue rose 26% to $64.6bn for the last quarter, beating expectations of $63.3bn. Sales growth of that size gives the company room to make large commitments to its leadership, even as its legal disputes grow more expensive.
Profit told a different story. Profits fell 37% to $13bn, dragged down by a $9.9bn charge related to Meta's lawsuit over child protection and social media addiction failings. A charge is a cost a company records in its accounts, and it can cut into profit even when revenue is climbing. That is what happened here, and it shows how legal bills can change a company's results from one quarter to the next.
On the same Wednesday, a judge in New Mexico ordered Meta to pay $25bn after a trial found the company had misled the public about how it handled Facebook user data. The ruling adds a large bill to the company's legal exposure and puts its handling of personal information back in front of the public. Together, the court ruling and the quarterly charge show Meta facing costs from more than one direction at once.
Whether the Share Structure Can Hold Up
The next test is the vote on Prop 40 early next month. If the measure passes, the Meta arrangement gives Zuckerberg a route to pay any bill without selling the voting shares that underpin his control. If it fails, the deal still contains an eight-year residency commitment, but the tax question that prompted it would fall away. The new shares would still exist, but the pressure behind them would ease.
The eight-year pledge is also worth watching. It will shape how long Zuckerberg is tied to California, and it could influence where Meta's leadership works and lives over the next decade. Any future move would have to be weighed against the terms he has agreed to, and the pledge is one of the clearest signals of how the company sees its own base.
For Meta, the coming weeks will test whether a share structure designed for one executive can hold up under public scrutiny. The company is splitting its stock for all shareholders, creating a new class of shares and tying its chief executive to the state, all while a ballot fight and a heavy court ruling continue. How voters respond to Prop 40 will show whether the arrangement is seen as a practical fix or as proof that the wealthiest can protect their own position.
Questions and answers
What is Meta's deal with Mark Zuckerberg?
Meta has agreed to give Zuckerberg new shares that he can sell to help pay a possible California billionaire tax. In return, he committed to remain a resident of California, or wherever Meta maintains its base, for eight years.
What is Proposition 40?
Proposition 40, or Prop 40, is a California ballot measure that would impose a one-off 5% tax on the roughly 250 billionaires who live in the state. Californians will vote on it early next month.
Why did Zuckerberg need a deal to pay the tax?
Zuckerberg told Meta he was considering moving his primary residence elsewhere because Prop 40 could expose him to a massive tax liability. He could have had to sell voting shares to pay it, which would have weakened his control of the company.
How do the new shares protect Zuckerberg's control?
Meta is creating a new class of non-voting shares through a two-for-one stock split for all existing shareholders. Zuckerberg can sell some of these class C shares to pay a tax bill, and the company says this would not dilute his control.
Topics: Meta, Mark Zuckerberg, California wealth tax, Proposition 40, Facebook, Rohit Khanna, billionaire tax
Sources: The Guardian Business