(MoneyWatch) The state of California has a $2.1 billion bet on Facebook stock - and an even bigger bet on the market as a whole.
The economically beleaguered state, which is attempting to hike tax rates in order to close a yawning budget deficit, estimates that 155 million restricted stock units that will be given to Facebook (FB) insiders over the next six months will net the Golden State a $2.1 billion tax payday. But that's predicated on the now seemingly optimistic notion that Facebook shares would pop after the offering and sell for $45 by November.
With Facebook shares down roughly 25% from the $38 IPO price, that projection is looking tenuous. Jason Sisney, deputy legislative analyst, says that if the shares remain depressed the state will take a hit amounting to hundreds of millions of dollars.
In fact, that hit may be even greater over time, considering that Facebook has granted nearly 2 billion stock options and restricted stock units to a group of insiders at a paltry $1 exercise price. Generally speaking the difference between the going market price - now around $29 - and the exercise price is a taxable gain. These insiders will be able to exercise those options and sell their shares after 3-to-6-month "lock-up" periods expire in August and November. However, no one knows how many of those shares will be exercised, triggering taxation, and not all the holders live in California. Thus state tax officials are not yet banking on that windfall.
However, the state is attempting to hike rates on the rich, partly to capitalize on all the newfound Facebook millionaires. Gov. Jerry Brown's proposed budget would hike income tax rates on those earning more than $250,000 annually to 10.3% from the current 9.71% rate; and he'd impose an 11.3% tax on those earning more than $350,000.
Indeed, California's government believes Menlo Park-based Facebook will be so pivotal to the state's well-being that the legislative analyst estimates that one-fifth of personal income growth in the state over the next few years could be directly or indirectly attributed to the social network's initial public offering.
Thus the slump in Facebook's share price is a significant concern. But an even bigger concern is the overall market decline that has hit virtually every investor - and is thus likely to create a broad-based decline in state tax revenues, if it doesn't reverse soon.
"It's unusual that a small, but noticeable, portion of California's revenue will come from the stock-related activity of a single company. That is an extraordinary thing," says Sisney. "But one cannot ignore the stock market when it produces - or reduces - revenues significantly. A continuation of the recent slump in the broader stock market, or failure of the market to reverse course, could affect state revenues by billions of dollars in the next year."
Source: www.cbsnews.com
An Open Letter To The California Hispanic Chambers Of Commerce - Huffington Post
Each year, 36,600 adults in California die from smoking. These aren't just numbers, rather they represent someone's father, mother, brother, sister or friend. These families will never be the same after experiencing a preventable loss.
The U.S. Centers for Disease Control and Prevention (CDC) report that lung cancer is the leading cause of cancer deaths among Hispanic men and the second leading cause of cancer deaths among Hispanic women. I am baffled and angered that an organization claiming to work for the advancement of our Hispanic community would oppose Proposition 29, an initiative on the June 5 statewide ballot that will raise the cost of cigarette packs by $1 and generate more than $500 million every year to support life saving research.
The California Hispanic Chambers of Commerce claims to provide "empowerment and education for California's Hispanic Businesses." It is shameful that you are misinforming our Hispanic business leaders and community about Prop 29. Might your stance have anything to do with you being in bed with Altria, the parent company for Philip Morris USA, one of the corporate sponsors listed on your website?
Here are the real FACTS and why we urge you to stop spreading falsehoods on behalf of Big Tobacco:
- Only those who purchase tobacco products will pay the new1 tobacco tax.
- If passed, Prop 29 will save 104,000 lives; stop 228,000 kids from smoking; and generate approximately $735 million every year to support life-saving research and tobacco prevention programs.
- Prop 29 will generate nearly2 billion worth of economic activity every year and create more than 12, 000 new jobs.
- Prop 29 will provide vital funding to make advances in prevention, detection and treatment of cancer, heart disease and other smoking-related illnesses.
- Accountability! A nine-member committee of California's leading cancer center directors, University of California chancellors, representatives of disease advocacy organizations and survivors will award all funds. That means the funds from this initiative cannot be used by politicians and will not be part of the general fund.
We urge you, board of directors and staff of the California Hispanic Chambers of Commerce, get out of bed with Big Tobacco! Per the CDC, cigarette smoking remains the principle cause of lung cancer. Our future looks grim if Big Tobacco wins.
Did you know that Latino youth are more likely to have higher rates of smoking than teens of other races and ethnicities, as well as Hispanic adults? In California, 34,000 kids start smoking every year. You claim to have the best interest of our Latino community in mind, but are in reality carrying the torch on behalf of Big Tobacco.
Over the last decade, Big Tobacco spent 10 times as much on marketing tobacco in California as the state spent on tobacco prevention. I'm sure you are aware that their predatory marketing strategies often target our Latino communities. Why is it that you choose to help Big Tobacco in opposition to Prop 29? Prop 29 will more than double the state's funding for smoking cessation programs that work. The increased price of tobacco products will lead to fewer teen smokers while the increased funds for tobacco control and cessation will help smokers quit. That will mean fewer smokers, and less profit for big tobacco. ¡Ya basta! Enough! Stop spreading blatant lies. Don't choose Big Tobacco over the health of your own people.
Tobacco use causes death and cancer in our communities. As a doctor, it is heartbreaking to see patients come through my door trying to quit but not being able to. It is even more painful to deliver life-threatening news. There is no question that I support Prop 29. Tobacco related illnesses, especially cancer, affect us all. It is not too late for you to do the right thing and stand with us in our fight against Big Tobacco. We urge all Californians to vote YES on Prop 29.
On June 5, join me and organizations such as PADRES Contra el Cáncer, the Dolores Huerta Foundation, Latino Health Access, LULAC (Central Coast and Salinas Valley Council), Silicon Valley Hispanic Chamber of Commerce, Latino Coalition for a Healthy California; leaders like State Assembly Member Gil Cedillo, State Senator Michael Rubio, State Senator Alex Padilla, Los Angeles Mayor Antonio Villaraigosa, Los Angeles Councilmember Ricardo Alarcón, San Diego Councilmember David Alvarez, San Francisco Supervisor David Campos; among many others and VOTE YES on PROP 29.
Source: www.huffingtonpost.com
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