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Facebook a windfall, not a solution, for California

May 18, 2012 | 11:05 am

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.


Jerry Brown unveils revised budget plan

Facebook stock stumbles in big public debut

Jerry Brown stymied by same budget dysfunction that plagued predecessors

-- Chris Megerian in Sacramento

Photo: Facebook is listed on the Nasdaq stock exchange. Credit: Carolyn Cole / Los Angeles Times