Mark Zuckerberg’s creative plan to pay California’s proposed billionaire tax without losing control of Meta

Meta’s board approved a new Class C common stock that gives holders economic ownership but no votes. The plan supports capital raising, employee compensation, and acquisitions, including Meta’s AI expansion. It also addresses a personal concern for Mark Zuckerberg if California’s proposed Proposition 40 becomes law.

Meta will give shareholders one Class C share for every Class A or Class B share they own. Zuckerberg could immediately sell or transfer up to 20% of the Class C shares he receives. That would represent 10% of his overall economic stake, according to Meta’s filing. The proceeds could help cover his potential tax bill.

Because the new shares have no votes, selling them would not reduce Zuckerberg’s voting control. Meta says the arrangement helps keep him leading the company from California and near its Superintelligence Labs. His potential tax bill has been estimated at as much as $11 billion.

Nonvoting stock represents an ownership stake in a company, but its holder does not vote on company decisions. The holder can still have an economic interest in the business. Meta’s Class C shares are an example because they give ownership but no voting power.

Voting stock adds a governance right. Owners of voting shares can cast votes on matters decided by shareholders, depending on the company’s rules. A person with voting shares therefore has both a financial stake and a formal voice in company decisions. Selling those shares can affect control when voting power is concentrated.

Companies may create separate classes to raise money or reward employees without changing who controls decisions. Meta says its Class C shares will support capital raising, employee pay, and acquisitions while maintaining the current voting structure. Zuckerberg controls around 60% of Meta’s vote, so protecting that structure matters to the company’s leadership.

The article estimates that Mark Zuckerberg could have to pay as much as $11 billion if Proposition 40 becomes law. The proposal is a one-time wealth tax, not a charge on only one type of income or asset. It would apply to the net worth of several hundred billionaires who primarily live in California.

The proposed rate is 5% of qualifying net worth. For example, the tax would measure a billionaire’s overall wealth and apply the one-time percentage to that amount. The article does not provide a precise calculation of Zuckerberg’s personal net worth, but it reports the possible result of his liability.

Proposition 40 was drafted by Berkeley tax law professors and sponsored by SEIU United Healthcare Workers West. Supporters say it could raise as much as $100 billion over five years. Zuckerberg’s possible bill is one reason Meta’s new nonvoting stock has drawn attention beyond ordinary corporate financing.

A founder’s control depends partly on how many voting rights the founder holds compared with other shareholders. When a founder sells voting shares, the buyer receives those rights. The founder then owns fewer votes, which can reduce the ability to influence shareholder decisions or maintain majority control.

Meta’s Class C shares separate economic ownership from voting power. Zuckerberg would receive Class C shares through the planned one-for-one dividend, then could sell or transfer up to 20% of those new shares. Buyers would receive an economic stake, but no votes. Zuckerberg would therefore raise money without transferring voting authority.

This matters because Zuckerberg controls around 60% of Meta’s vote. The filing specifically says the arrangement could help him pay a potential Proposition 40 liability without affecting his majority voting control. The plan also supports Meta’s stated desire to keep him leading the company from California.

Meta’s one-for-one dividend gives each shareholder one Class C share for every Class A or Class B share owned. For Zuckerberg, that means the number of shares he receives is equal to his original holdings. After the dividend, half of his shares would be Class C and half would be existing shares.

Because Class C shares make up half of his post-dividend shares, selling 20% of that Class C portion equals 20% of half his total holdings. That calculation produces 10% of his overall economic stake. Meta’s filing says he could sell or transfer that amount for any reason, including paying a Proposition 40 liability.

The transaction would not change shareholder voting power, Meta says. The Class C shares have no votes, so selling them would transfer economic ownership without transferring voting control. This is why the plan could provide Zuckerberg with substantial cash while preserving his majority position in Meta’s voting structure.

Proposition 40 would impose a one-time 5% tax on the net worth of several hundred billionaires who primarily live in California. It is sponsored by SEIU United Healthcare Workers West and was drafted by Berkeley tax law professors. The measure is aimed at wealthy residents rather than ordinary taxpayers.

Backers say the proposal could generate as much as $100 billion over five years. Most of that money would go toward the state’s healthcare needs. The remaining funds would support food assistance and education. The article presents these figures as estimates from supporters of the measure.

The proposal has triggered strong opposition among prominent Silicon Valley businesspeople. Google co-founder Sergey Brin has campaigned against it, while critics warn of capital flight from California. Zuckerberg’s possible response shows the debate’s practical stakes: Meta created nonvoting shares that could help him fund the tax without surrendering voting control.

A company share can represent economic ownership and decision-making power at the same time. Economic ownership gives the holder a stake in the company’s value. Voting power gives the holder a say in decisions made by shareholders. These rights do not always have to travel together.

Meta’s plan separates them. Class C shares will provide an economic stake but no vote. Meta says it can use the shares for capital raising, employee pay, and acquisitions. Zuckerberg could also sell some Class C shares to raise cash, while buyers receive ownership without receiving control over company decisions.

Different share classes can help a company pursue financing or compensation goals while preserving an existing voting structure. That is especially important at Meta because Zuckerberg controls around 60% of the vote. The company says maintaining his leadership in California and near Meta Superintelligence Labs was an important reason for the arrangement.