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Republicans: No Need for Tax Increases with Facebook's IPO

By Jessica Levinson
February 6, 2012
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Photo: afagen/Flickr/Creative Commons License

Goodbye, budget deficits; hello, surplus funds? I could "like" that.

Last week Facebook filed its Initial Public Offering (IPO). In less time than it takes me to "like," comment, post or share, some claimed that California's budget problems were about to be solved (or at least eased).

An initial question: How could a private company's decision to file an IPO save the state? For starters, when future stock owners sell their shares (presumably at a profit) they will pay taxes on their gains.

Some Republican legislators have said that this future boon to the state's coffers means that Governor Jerry Brown's proposed tax initiatives are not needed. Brown, who proposed his budget before Facebook filed its IPO, said that if voters do not approve his tax proposals he would be forced to cut spending from public schools.

According to a statement by Assemblywoman Connie Conway (R) and Senator Bob Huff (R), Republicans would use the "Facebook revenues" for one-time purposes. By contrast, Brown's tax proposal would include a longer-term five-year tax increase to be used in the continuing funding of state programs.

Republicans have also said that the future "Facebook revenues" (which will come in courtesy of state taxes) demonstrate that taxes should be (or remain) low in order to allow businesses like Facebook to flourish.

Democrats have suggested holding off on any additional spending cuts until we all determine the size of the Facebook revenues.

If Facebook's IPO has done anything for Sacramento in the short term, it is give legislators and lobbyists something (more) to argue about. Where is the Facebook button for "not a shocker"?

We don't know how much revenue Facebook will bring to the state, or when it will come. We do know it will not be enough to cure all that ails California. So roll up your sleeves, legislators, it's time to give us something good to post about.

Jessica Levinson writes about the intersection of law and government every Monday. She is a Visiting Professor at Loyola Law School. Read more of her posts here.

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