California’s proposed wealth tax is facing backlash as Stanford economists warn it could backfire and cause long-term revenue losses. David Asman highlights the constitutional issues as early elections begin.
Mark Zuckerberg has reached an agreement with Meta to stay in California after raising the possibility of leaving the country amid concerns over the proposed billionaire wealth tax.
Zuckerberg, the CEO of Meta, previously told the company that it is considering moving its main location outside of California because of Proposition 40, a ballot initiative that will impose a one-time tax equal to 5% of the net worth to billionaires who are California residents on January 1, 2026, if approved.
Under the agreement, Zuckerberg will receive non-voting shares that can be sold to help cover a potential wealth tax bill in exchange for a commitment to remain a resident of California, or the state where Meta maintains its headquarters, for eight years, according to Reuters.
Zuckerberg, the world’s sixth-richest person with a net worth approaching $250 billion, according to Forbes, could face a hefty tax bill that would require him to sell his company shares.
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Meta CEO Mark Zuckerberg reached an agreement with the company that could allow him to cover the California billionaire’s potential wealth tax bill while maintaining voting control, according to Reuters. (Finn Gomez/Getty Images/Getty Images)
If passed by voters in November, the tax would be due in 2027, although payments could be spread over five years in additional fees. Real estate, pension and retirement accounts are generally exempt from taxation.
Zuckerberg could immediately sell 20% of the Class C shares he received, which represent 10% of the overall economic stake in the company, potentially allowing him to pay taxes without giving up voting control, according to Reuters.
Meta said Wednesday that it plans to issue new non-voting Class C common stock in January 2027 to help fund acquisitions and retain top talent while maintaining Zuckerberg’s control of the company.
In a statement provided to FOX Business, Meta pointed to comments from Chief Financial Officer Susan Li, who said the new shares are designed to help the company raise capital, balance employees and pursue acquisitions while maintaining its existing voting structure.
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Supporters hold signs supporting the Billionaire Tax Now coalition during a press conference in Los Angeles, California, Monday, April 27, 2026. (Caroline Brehman/Bloomberg via Getty Images/Getty Images)
“We created this new class of shares with the goal of creating publicly traded non-voting shares that can be used for capital increases, employee compensation, acquisitions, other general corporate purposes while maintaining the voting power of existing Class A and B shareholders,” Li said during Meta’s third-quarter earnings call.
Meta also said the decision followed recommendations from a special committee of independent directors, which concluded that the new share class would help finance the company’s growth and maintain Zuckerberg’s leadership.
According to the company’s filing, the committee emphasized the importance of Zuckerberg remaining in California to maintain close coordination with Meta’s management and close proximity to Superintelligence Labs.
Although the ballot measure has been approved by the California Democratic Party, some prominent Democrats, including Governor Gavin Newsom, oppose it.
Economist Art Laffer, a former economic adviser to President Ronald Reagan, previously warned that the measure could accelerate an exodus of California’s wealthiest residents.
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Meta CEO Mark Zuckerberg could sell newly issued non-voting shares to help cover a potential tax bill if California voters approve a proposed billionaire wealth tax. (David Paul Morris/Bloomberg via Getty Images/Getty Images)
“No one wants to move there to build wealth only to be faced with this type of tax. It will cause an exodus of billionaires, who have not left California because the income tax does not affect many billionaires at all. This tax will really affect people,” said Laffer.
California businessman Eric Schiffer, chairman of the Patriarch family office and CEO of Reputation Management Consultants, previously told FOX Business that the move could cause wealthy businessmen to leave California.
“I think the impact of this passing in California is a giant suction sound of all these entrepreneurs being sucked out of California because they don’t want to stay,” Schiffer said.
The nonpartisan Legislative Analyst Office of California (LAO) said “some billionaires” may decide to leave the country in response to the tax, potentially reducing income tax revenue they generate.
The LAO also estimates that departures and other behavioral changes could reduce state income tax revenue by less than $1 billion annually. However, the office estimates that the wealth tax could raise tens of billions of dollars over the years.
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Proposition 40 would impose a one-time 5% tax on the net worth of billionaires living in California on January 1, 2026. (Tim Rue/Bloomberg via Getty Images/Getty Images)
Arabella Bennett and Reuters FOX Business contributed to this report.