On November 3, Californians will vote on Proposition 40, a one-time 5% tax on the net worth of billionaires who lived in the state on January 1, 2026. A week earlier, Meta created a new class of stock that would let its CEO, Mark Zuckerberg, pay that kind of bill without giving up control of the company. Here’s the breakdown.
What Prop 40 does
The tax in Proposition 40 would be due in 2027, and billionaires could spread payments over five years if they pay extra, according to California's Legislative Analyst's Office (LAO) [1]. Real estate, pensions, and retirement accounts are generally left out, so most of what gets taxed is stock and business ownership. 90% of the money has to go to public health care [1].
The LAO expects the state would collect tens of billions of dollars, but says the exact amount is highly variable. Some billionaires could flee to other states due to the tax, which could cut California's income tax revenue by around $1 billion a year [1].
In the official voter guide, supporters (including SEIU-United Healthcare Workers West) argue about 200 billionaires would replace health care money cut by federal legislation. Opponents (including the California Medical Association and the California School Boards Association) argue it would push wealthy people and companies out of the state, hurting the California economy through lost investments and tax revenues [2].
Where Zuckerberg comes in
Almost all of Zuckerberg's wealth is Meta stock, so Zuckerberg would have to sell a lot of his equity to shore up room for this billionaire tax. However, selling a lot of the stock would shrink his voting power. Meta's own filing says Prop 40 could leave him with a "significant, multi-billion dollar tax payment" [3]. The same filing says he told a special committee of Meta's board that he was evaluating moving his primary residence out of California [3].
The committee's answer was a new nonvoting stock, which they are calling Class C stock. Zuckerberg would be able to sell 20% of his new Class C shares right away to get the cash necessary to pay the Prop 40 tax without losing voting power, assuming Prop 40 passes. The other 80% would be released slowly, 2.5% each quarter, as long as he keeps leading Meta. In return, he agreed to stay a resident of California (or wherever Meta is headquartered) for eight more years [4].
The new Class C stock
Every Meta shareholder will get one Class C share for each share they already own. Meta expects that to work like a two-for-one stock split, and says it won't change anyone's voting power [5]. The shares take effect January 19, 2027, right around when the Prop 40 tax payment is due for Zuckerberg [4].
Class C shares have no votes, so Meta can sell them to raise money without touching Zuckerberg's control. Meta needs the money, as it reported a negative free cash flow in their Q3 earnings report. It expects to spend $135 billion to $145 billion this year, mostly on AI, and its free cash flow last quarter was negative $2.1 billion, compared with positive $10.6 billion a year earlier [5]. This is a cause for Meta’s recent stock price dip.
Nvidia, Broadcom, AMD Involvement
On October 26, Meta announced about $35 billion in stock sales. Nvidia, Broadcom, and AMD (1st, 3rd, and 6th largest semiconductor manufacturers by market cap, respectively) said they may buy up to $5 billion of Meta's regular Class A stock combined, though those commitments aren't binding [6]. Meta also plans to sell up to $60 billion of Class C stock starting early next year [6]. This raised capital would provide Meta with the much needed cash flow to invest in the high upfront cost of AI infrastructure, allowing them to continue being a frontrunner in the AI race.
The money moves in a circle. In February, Meta agreed to buy up to 6 gigawatts of AMD chips and got a warrant for up to 160 million AMD shares [7]. Now AMD and Nvidia are buying Meta stock, and Meta is spending that money on AI, which includes their chips.
Pass or Fail
If Prop 40 passes, Zuckerberg's tax bill comes due in 2027, the same year Class C shares start trading. If it fails, Meta still has a nonvoting stock it can sell to fund AI. However, Propositions 41 and 42 are also being voted for on Nov. 3, and if either gets more votes then Prop 40, the former will be shut down immediately. If Prop 40 does get more votes and billionaires attempt to leave the state, it is still a toss up on if they have to pay the tax. Since the tax applies to billionaires who were residents of the state on January 1st, 2026, leaving now wouldn’t do anything. But, there is a possibility that the retroactive clause gets deemed unconstitutional in state or federal courts, making the tax only applicable to current residents of the state when the tax is enforced. Some notable names that have left California or significantly cut ties are Sergey Brin and Larry Page, Co-Founders of Google, and Peter Thiel, founder of Palantir and PayPal [8]. Billionaires leaving the state not only would decrease the Prop 40 revenues, if the retroactive clause gets struck down, but would also lower California’s income tax revenue, as mentioned before. This would decrease tax revenues by billions of dollars, possibly doing more harm than good with the Prop 40 tax.
