Facebook IPO Will Boost 1%, But the Rest of Us Won't Be Sharing
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And so on. The result is what Lazonick calls "contagious compensation,” which has stoked economic inequality in the US. The 99% has been largely left with food stamps or flat wages for a generation.
Zuckerberg is also able to take advantage of a one percent-friendly concept in our tax code known as “realization,” which says that individuals are not taxed until they actually sell property and realize their gains. When it comes to the publicly traded stocks of the superwealthy, this system shortchanges the public of hundreds of billions of dollars of revenue and favors founders and investors over wage earners.
As tax lawyer David S. Miller explained in the New York Times, Zuckerberg will exercise stock options worth $5 billion when FB goes public. This $5 billion will be treated as salary, and he will have a tax bill of over $2 billion. But the stock he does not sell will not be taxed. “Instead,” explains Miller, “he can simply use his stock as collateral to borrow against his tremendous wealth and avoid all tax.” He can borrow to buy yachts, vacation homes, fancy cars, etc, which will be cheaper for him than selling shares because of tax avoidance. If he never sells his shares, he never gets taxed, and he can pass them on to his heirs. Steve Jobs never paid taxes on his Apple stock after rejoining the company in 1997 and did not pay a cent on the $2 billion he held until his death.
Your Identity for Sale
When FB or any company goes public, there’s more pressure to increase short-term profitability and generate new revenue. FB doesn’t really make anything or provide any particular service in the traditional sense. It makes money from obtaining and compiling the personal information of users, which is attractive to advertisers. As FB explained in its IPO documents, “Advertisers can engage with more than 800 million monthly active users (MAUs) on Facebook or subsets of our users based on information they have chosen to share with us such as their age, location, gender, or interests.”
Unlike Google or other Internet companies, FB’s content is entirely created by users. But users aren’t going to be paid for it. That’s not fair, says Nick Bilton of the Sydney Morning Herald. He reckons that Zuckerberg owes him fifty dollars for liking, poking, and sharing on his site. As Bilton argues, “I helped build this thing, too. Facebook laid the foundation of the house and put in the plumbing, but we put up the walls, picked out the furniture, painted and hung photos, and invited everyone over for dinner parties.” His article points out that FB could create a “two-way financial street” in which users could be paid for content and our personal information.
As FB tries to monetize users, it may well get more intrusive about mining our information and distributing it, which it has done in the past, much to the disgust of many sharers and consumer watchdogs. FB claims that users control what they share through the website’s privacy and sharing settings. But there are plenty of concerns about improper disclosure, which can lead to things like identity theft and other scenarios which may harm the ordinary user, from hacking to stalkers.
An IPO makes a company like FB worth an enormous amount of money, and if there’s one thing we know about our political system, it’s that money talks. FB already has a very big lobbying presence in Washington, and even a political action committee. And that influence is only going to get bigger. Would FB lobby for lax laws on privacy issues? You bet it would. And since we have a president who likes to be seen as friendly to high tech, it will likely be heard.