Troubled California set to reap millions of dollars in much-needed tax revenue from Facebook IPO to help cut its $9.2bn deficit.
It’s a good job Facebook decided to open up in California, as everyone could soon be a winner.
The Palo Alto company is expected go public this year, meaning California would reap hundreds of millions of dollars in capital gains taxes.
The taxes would come from investors and employees profiting from stock sales and bring much-needed cash to a state government facing a $9.2billion deficit.
An initial public offering from the Silicon Valley social networking giant is anticipated to see the company issue $10billion of stock. It could even happen within the next few months, analysts say.
California taxes capital gains from stock sales and could be in for a big revenue boost if Facebook and other local companies go public.
‘In the coming months, the state’s revenue forecast will need to be adjusted somewhat,’ analyst Mac Taylor wrote in a report on California Governor Jerry Brown’s budget proposal.
Mr Taylor added that the forecast should ‘account for the possibility of hundreds of millions of dollars of additional revenues related to the Facebook IPO’.
He cautioned that the performance of the overall stock market could play a larger role than any single IPO, no matter how successful, as the market could have an unusually strong or weak year.
‘We caution that it will be impossible to forecast IPO-related state revenues with any precision,’ the report stated in a section titled ‘The Facebook Effect.’