Please ensure Javascript is enabled for purposes of website accessibility

Poorest Americans Dealt Biggest Blow Under Senate Republican Tax Package

14 hours ago

Trump Vowed to Dismantle MS-13. His Deal With Bukele Threatens That Effort.

17 hours ago

Ukraine Voices Concern as US Halts Some Missile Shipments

18 hours ago

Poll: Most Americans Say National Divide, Political Violence Threaten Democracy

18 hours ago

Paramount Settles With Trump Over ‘60 Minutes’ Interview for $16 Million

18 hours ago

Republicans Tee up House Vote on Trump Bill, Outcome Uncertain

18 hours ago

What’s Next for Sean ‘Diddy’ Combs After His Sex Trafficking Trial?

18 hours ago

Dalai Lama Says He Will Be Reincarnated, Trust Will Identify Successor

19 hours ago
IPOs Bring Tax Jackpot for California; Can Lawmakers Resist?
gvw_ap_news
By Associated Press
Published 6 years ago on
May 6, 2019

Share

SACRAMENTO — Uber and Airbnb are among at least six California-based companies valued at more than $1 billion expected to go public this year, creating a new class of millionaires and billionaires and a welcome quandary for the state’s budget writers.

“My sense of it is we will have to be very careful. Our overall budget is $200 billion. So even if there was a $1 billion or $2 billion windfall, let’s say, it doesn’t make or break the budget — unless we spend it in the wrong way.” — Assembly Budget Chairman Phil Ting

Though it’s tough to gauge the total tax revenue all those profits will produce, it’s not a stretch to estimate California will add $1 billion or more after the initial public offerings, or IPOs, are made.

“I’ve never experienced anything like this,” said Daniel Morgan, senior portfolio manager for the investment firm Synovus Trust. “It’s definitely going to be a big lottery for everyone. Not only tech owners, but I think the state of California.”

It’s an enticing opportunity for lawmakers to fund chosen causes — a temptation legislative leaders are trying to resist. Lawmakers can’t count on the money being there every year, and Assembly Budget Chairman Phil Ting said they are intent on learning from their past mistakes.

“My sense of it is we will have to be very careful,” said Ting, a Democrat from San Francisco. “Our overall budget is $200 billion. So even if there was a $1 billion or $2 billion windfall, let’s say, it doesn’t make or break the budget — unless we spend it in the wrong way.”

The State Has a Projected $21 Billion Surplus

In the late 1990s and early 2000s, that’s what happened. Lawmakers were quick to expand state spending amid a booming tech economy and the corporate IPOs that went with it, only to see those gains vanish when the bubble burst and ushered in a recession and a $14 billion budget gap.

“From a state budget perspective, major IPOs are a bit like rainbows. They are lovely to watch but they don’t last for very long,” said H.D. Palmer, deputy director for external affairs at the California Department of Finance, which manages Gov. Gavin Newsom’s budget plans.

It could be difficult for lawmakers to keep their hands off any extra money because, this year, California has so much of it.

The state has a projected $21 billion surplus in the first year of Newsom’s administration, and that’s without factoring in money from the IPO wave. Former Gov. Jerry Brown began his administration with a deficit, and he frequently clashed with fellow Democrats who wanted to spend more while he wanted to save it.

As he left office, with the California economy humming, Brown warned Newsom might have a tough time convincing the Legislature not to drastically increase spending.

Newsom did propose new recurring spending, including proposals to improve drinking water in rural areas and bolster the state’s 911 emergency call system. But he proposed new taxes to pay for them instead of relying on the state surplus.

IPO Windfalls Are Unusual in the World of State Budgets

Newsom’s budget proposal will be revised next month based on revenue collections. Ting said it likely will not include revenue from the IPOs.

“You see these surpluses out there and it’s deja vu all over again. Are we going to spend this money on one-time programs? Given California’s history, I think the likelihood of that is doubtful.” — David Wolfe

David Wolfe is skeptical. The legislative director of the Howard Jarvis Taxpayers Association noted California has historically had trouble saving money during the good years.

“You see these surpluses out there and it’s deja vu all over again,” said Wolfe, whose organization favors limited taxation. “Are we going to spend this money on one-time programs? Given California’s history, I think the likelihood of that is doubtful.”

IPO windfalls are unusual in the world of state budgets, but they have become common in California, a state with nearly 40 million people that boasts the fifth-largest economy in the world. The state budget relies heavily on the wealthiest earners; in 2017, the top 1% were responsible for more than 47% of the state’s income tax collections.

Most of that comes in capital gains, which in California is taxed the same as income and are heavily dependent on the stock market. California got nearly $11 billion from capital gains taxes in 2007, only to see it drop to $4.6 billion in 2008 and $2.3 billion in 2009 during the Great Recession.

Redicting How Much Money California Will Get From These IPOs Is Difficult

This budget year, state officials expect to get $15.2 billion from capital gains taxes, the largest amount ever. And that’s without adding in of the expected jackpot from the major IPOs.

Companies including ride-sharing startup Lyft and social media website Pinterest already have gone public, but it could be months before the state starts seeing the tax revenue from them. Uber, corporate chat room provider Slack, home rental site Airbnb and data software company Palantir are poised to go public later this year.

Of those, Uber is the behemoth. Experts predict the company could be valued as much as $91 billion , a decline from initial estimates but still near Facebook’s $100 billion initial public offering in 2012 that netted California $1.3 billion in tax revenue.

Predicting how much money California will get from these IPOs is difficult. Facebook’s 2012 IPO was unusual in that most of the state’s tax gains game from one person: CEO and founder Mark Zuckerberg, whose wealth state officials could easily guess based on the company’s regulatory filings.

This year, more companies going public involving more investors makes it harder to forecast.

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

House Republicans Say They Expect to Vote Tonight on Trump’s Tax-Cut Bill

DON'T MISS

San Luis Obispo’s Madre Fire Grows to 8,300 Acres, Prompts Evacuations

DON'T MISS

SLO Deputies Fatally Shoot Man in Los Osos Weeks After US Marshal Impersonation Arrest

DON'T MISS

Madera County Deputy Injured, Wanted Felon Arrested After Violent Struggle

DON'T MISS

San Luis Obispo County Wildfire Burns More Than 3,000 Acres. No Containment Yet

DON'T MISS

Wired Wednesday: Why Is State Lawmaker Taking Aim at Rooftop Solar?

DON'T MISS

Two Visalia Men Sentenced in 2021 Motel Killing

DON'T MISS

Ex-Jan. 6 Defendant Gets Life in Prison for Plot to Kill FBI Agents

DON'T MISS

Del Monte Files for Bankruptcy. Gets Nearly $1B to Keep Producing Through Process

DON'T MISS

Who is Running for Fresno Area Offices in 2026? An Updated Look

UP NEXT

CHP Officer Dies in Line of Duty After Medical Emergency While on Patrol

UP NEXT

Downtown Housing Could Rise in Many California Cities, but Barriers Remain

UP NEXT

Poll: Most Americans Say National Divide, Political Violence Threaten Democracy

UP NEXT

Trump Pulls Back 150 Guard Troops From Federal Duties in California

UP NEXT

California Republicans Send Message to Trump: Deport Criminals, Not Our Vital Workers

UP NEXT

CA Rolls Back Its Landmark Environmental Law to Speed Housing Construction

UP NEXT

California Seizes Over 600,000 Pounds of Illegal Fireworks. Newsom Calls for Safe Celebrations

UP NEXT

Suspect Identified in Ambush Shooting That Killed 2 Idaho Firefighters

UP NEXT

Buying a Home With Solar? Beware of CA Bill Written by Former Utility Co. Exec

UP NEXT

Trump Administration Sues Los Angeles Over Immigration Enforcement

Madera County Deputy Injured, Wanted Felon Arrested After Violent Struggle

11 hours ago

San Luis Obispo County Wildfire Burns More Than 3,000 Acres. No Containment Yet

12 hours ago

Wired Wednesday: Why Is State Lawmaker Taking Aim at Rooftop Solar?

12 hours ago

Two Visalia Men Sentenced in 2021 Motel Killing

12 hours ago

Ex-Jan. 6 Defendant Gets Life in Prison for Plot to Kill FBI Agents

12 hours ago

Del Monte Files for Bankruptcy. Gets Nearly $1B to Keep Producing Through Process

13 hours ago

Who is Running for Fresno Area Offices in 2026? An Updated Look

13 hours ago

CIA Review Finds Flaws but Does Not Dispute Finding Putin Sought to Sway 2016 Vote to Trump

14 hours ago

Poorest Americans Dealt Biggest Blow Under Senate Republican Tax Package

14 hours ago

Check Out Newest Downtown Mural. It’s a Spectacular Tribute to Fresno Artisans

15 hours ago

House Republicans Say They Expect to Vote Tonight on Trump’s Tax-Cut Bill

WASHINGTON – Republicans in the House of Representatives on Wednesday struggled to pass President Donald Trump’s massive tax-cut...

11 hours ago

Speaker of the House Mike Johnson speaks to the press, as Republican lawmakers struggle to pass U.S. President Donald Trump's sweeping spending and tax bill, on Capitol Hill, in Washington, D.C., U.S., July 2, 2025. (Reuters/Annabelle Gordon)
11 hours ago

House Republicans Say They Expect to Vote Tonight on Trump’s Tax-Cut Bill

The Madre Fire in San Luis Obispo County has rapidly expanded to 8,396 acres with no containment, prompting evacuation orders and warnings near New Cuyama. (CalFire)
11 hours ago

San Luis Obispo’s Madre Fire Grows to 8,300 Acres, Prompts Evacuations

Andrew Biscay, 40, was arrested Friday, June 20, 2025, after deputies found him with a fake U.S. Marshal’s badge, homemade firearm, and law enforcement-style gear during a warrant arrest. (Madera County SO)
11 hours ago

SLO Deputies Fatally Shoot Man in Los Osos Weeks After US Marshal Impersonation Arrest

On Tuesday, July 1, 2025, a Madera County sheriff’s deputy was injured while trying to arrest a wanted felon, Felix Adrian Nucamendi Carrasco, 40, who later fled and was captured near Raymond Road. (Madera County SO)
11 hours ago

Madera County Deputy Injured, Wanted Felon Arrested After Violent Struggle

A wildfire dubbed the Madre Fire has burned over 3,300 acres near New Cuyama with 0% containment, officials said Wednesday, July 2, 2025. (CalFire)
12 hours ago

San Luis Obispo County Wildfire Burns More Than 3,000 Acres. No Containment Yet

12 hours ago

Wired Wednesday: Why Is State Lawmaker Taking Aim at Rooftop Solar?

Jose Luna (left), 33, and Ralph Grajeda, 45, both of Visalia, have been sentenced for their roles in the 2020 shotgun killing of Robert Soto at a local motel. (Tulare County DA)
12 hours ago

Two Visalia Men Sentenced in 2021 Motel Killing

A U.S. Justice Department logo or seal showing Justice Department headquarters, known as "Main Justice," is seen behind the podium in the Department's headquarters briefing room before a news conference with the Attorney General in Washington, January 24, 2023. (Reuters File)
12 hours ago

Ex-Jan. 6 Defendant Gets Life in Prison for Plot to Kill FBI Agents

Help continue the work that gets you the news that matters most.

Search

Send this to a friend