Facebook a windfall, not a solution, for California
It’s finally happened -- Facebook debuted on Wall Street on Friday in the biggest initial public offering ever for a technology company.
California, which is scrambling for every dollar as its deficit grows, is eagerly anticipating a glut of Facebook wealth. But despite the company’s big splash, estimated tax revenue from Facebook and its newly minted millionaires will be far from a panacea for the state’s budget crisis.
Gov. Jerry Brown’s administration expects to reap $1.5 billion in tax revenue related to the Facebook IPO by next June, less than 10% of the state’s nearly $16-billion deficit. Roughly $195 million could come just from taxes on Mark Zuckerberg, Facebook's chief executive.
The calculation is based on a $35 share price. Since the stock began trading on Friday morning, the price has hovered around $40, slightly above its $38 starting point.
The state could also reap more revenue from Facebook if voters approve Brown’s tax plan, which would raise levies on incomes of $250,000 or more by 1 to 3 percentage points for seven years. The plan would also increase the sales tax by a quarter-cent for four years.
If the tax plan passes in November, the state would pull in an additional $400 million, for an estimated total of $1.9 billion.
Facebook won’t be a long-term solution for California’s budget. The Legislative Analyst’s Office, which provides nonpartisan budget advice to state lawmakers, expects tax revenue connected to the company will drop to $650 million in the 2013-14 fiscal year, then $150 million after that.
Those estimates are higher than the Brown administration’s because they assume the share price rising to $45 later this year.
Still, the company is expected to have a broad impact on the state economy. Twenty percent of personal income growth in the state this year could be attributed to the company, the Legislative Analyst’s Office said.
-- Chris Megerian in Sacramento
Photo: Facebook is listed on the Nasdaq stock exchange. Credit: Carolyn Cole / Los Angeles Times