The Madeleine Brand Show for February 2, 2012

Facebook's status update could mean new money for California

Mercer 16693

Scott Beale/Flckr

Facebook's IPO could mean new money, new offices, and new employees.

Facebook's IPO will allow its investors to own a piece of one of the most successful companies of the last decade. For California, where Facebook is based, the IPO could mean an influx of new money.

Jason Sisney, Deputy Legislative Analyst for State and Local Finance, said profits made on the sale of Facebook stock count as capital gains, an important part of state revenues.

The state has made a windfall from an Internet IPO before.

In the spring of 2006, former Gov. Arnold Schwarzenegger reported a surprising $7 billion in state revenues; just 15 months after Google employees began selling their IPO shares from 2004. The “Google effect” increased state tax returns by 27 percent at or above $1 million of income.

Could a "Facebook Effect" be next?

The political implications have already been raised, with some suggesting the windfall be used for schools, and Gov. Jerry Brown proposing the money go toward alleviating California’s debt. But Sisney said there’s no way to accurately predict how much the state will get, or how soon.

“There are all kinds of variables; how long the current insiders of the company have to wait until they sell the stock, whether changes in tax law would induce them to sell their stock later or earlier."

Guest:

John Meyers, from The California Report


With contributions by Andrea Wang

blog comments powered by Disqus