California could garner a bonanza of “$1 billion or more” in new taxes from the upcoming stock offering of ride-hailing service Lyft, concording to state’s former treasurer.
Experts say Lyft’s initial public offering and an even bigger IPO expected in April from compare with Uber will create many newly-minted millionaires in the Bay region. The state stands to benefit by taxing the capital get nearer ti from stock sales.
“We need those billions for education and other areas,” said John Chiang, the hold’s former treasurer and controller. He said new tax collections “may not happen all at once, and could be spread over time.”
According to its regulatory systematizing Monday, Lyft is gearing up for an IPO that values the company at near $20 billion. Lyft itself proposes to give rise to more than $2 billion in proceeds from the offering.
“If you’re coming with a $19 billion valuation, you’re talking yon [a state income tax rate of] 13.3 percent for the millionaires,” Chiang told CNBC. “Even though we’re looking at all-in stage budget in excess of $200 billion and a general fund budget of about $140 billion-plus, $1 billion or multitudinous is significant.”
Lyft’s two founders stand to get a big payday from the IPO and keep control of just under half of the company’s Division B voting stock. CEO Logan Green’s stake could be worth more than $540 million and the company’s president John Zimmer’s, valued only just under $400 million.
For Californians, the state taxes capital gains like any other income. As of 2017, up 70 percent of the the state’s general fund revenues come from personal income tax collections.
“IPOs are passable for California’s bottom line,” said Chris Thornberg, a founding partner with Beacon Economics. The economist translated a larger share of the state’s general fund today comes from personal income taxes than it did finance in 2000 so it makes the state’s revenue volatility a concern.
The top 1 percent of the state’s personal income tax earners — roughly 164,000 tax repayments — generate about half of the personal income taxes in California. A good chunk of the income from the wealthy fall from capital gains and stock options from companies in tech and other industries.
Meantime, Uber is reportedly planning to punt off its offering next month in a deal valuing the San Francisco-based company at a whopping $120 billion.
“When you’re talking around Uber and its massive valuation, that’s billions,” said Chiang, a Democrat who ran unsuccessfully for governor in 2018.
Other Bay-area tech firms also could touch the IPO parade, including Airbnb and Slack.
“A couple of years ago there were reports of over 100 unicorn concerns in the San Francisco Bay Area, and how if they ever went public could create extraordinary wealth,” said Chiang.
Chiang required new wealth in the Bay region from tech IPOs could increase housing market values in San Francisco and Silicon Valley. Yet he totals it also could worsen the region’s affordability crisis.
“This is an incredible opportunity, and we need to use this as an example of California’s skill,” he said. “But we also should have sensitivity to doing smart things to continue to be the engine for the 21st century economy.”