California is gearing up to get a tax windfall from all the initial public offerings of California companies slated for this year.
According to a report in The Wall Street Journal, close to 10 percent of the tax revenue for the state in the coming fiscal year will come from capital gains. It will amount to $13.8 billion, noted the report. The paper noted the revenue from taxes could grow even more as companies and executives tap the public markets to cash in. Lyft, which is valued at $24 billion, is the next IPO — but more are following after that. Uber, Slack Technologies and Pinterest are all slated to have IPOs this year. Uber alone is valued at $120 billion. When Facebook went public, The Wall Street Journal reported California got $1.3 billion in tax revenue.
According to the report, the money that comes from the IPOs goes into the state’s general fund, with some of it going into the state’s savings account and a fund for mental health services. “These are revenues that will come into the state on a one-time, or a limited-time, nature and the department of finance and certainly Governor Newsom are very much mindful of the fact that the financial markets can be extremely volatile,” said H.D. Palmer, a spokesman for Newsom’s department of finance, in the report. The paper noted that in the past Newsom said he will use the surplus at the state to pay down debt and increase spending on programs such as early childhood education, housing, and healthcare. If California gets billions in tax revenue from the IPOs of tech companies, the governor could face pressure from liberal legislators and interest groups to increase spending. The report noted that during the dot com bust when scores of IPO companies went under, it went from a surplus of $12.4 billion to a deficit in a year.