Meta CEO Mark Zuckerberg Set to Earn $700 Million in Dividends
Mark Zuckerberg, CEO of Meta Platforms Inc., delighted Meta shareholders and Wall Street this week with the announcement of the company’s first-ever dividend. This news comes as Meta’s stock dividends prove to be a significant boost to Zuckerberg’s portfolio.
Implications of the Dividends and Taxation
According to FactSet, Zuckerberg owns nearly 350 million shares of Meta and stands to make approximately $700 million in dividends yearly. However, the IRS will receive a significant share of these dividends in taxes.
Accounting experts estimate that Zuckerberg’s federal taxes on the Meta stock dividends will amount to nearly $167 million per year. This figure takes into account the 20% qualified-dividend tax, as well as the 3.8% tax on investment returns for wealthy households. In addition, Zuckerberg may have to pay around $93.1 million in California income taxes on the dividends.
Altogether, the anticipated federal and state taxes on the Meta dividends sum up to a staggering $259.7 million annually. This tax bill places Zuckerberg’s tax rate on the dividends at approximately 37.1%, which experts consider to be fairly high.
Comparison with Taxation on Wages and Investments
The divergent tax rates on wages and investments have been a topic of debate concerning U.S. tax policy. Proponents of reform argue that the preferential rates on dividends and stock profits benefit the top 1% of taxpayers, including Zuckerberg. Meanwhile, regular retail investors, who rely heavily on their salaries, face higher tax rates due to the larger proportion of their income derived from wages.
While capitals gains and qualified dividends are taxed at rates of 0%, 15%, and 20%, wages are taxed at higher rates, with the top marginal rate currently set at 37%. This contrast raises questions about the fairness and equality of the existing tax system.
Meta’s Impressive Growth
Meta shares saw a significant rise, soaring 20.5%, and closing at a record-high of $474.99 on Friday. The Dow Jones Industrial Average (DJIA), S&P 500 (SPX), and Nasdaq Composite (COMP) all reflect a positive market sentiment and closed higher on the same day.
Expert Views and Next Steps
Andrew Schmidt, an accounting professor at North Carolina State University’s Poole School of Management, highlighted that despite the seemingly high tax bill of $167 million, if Zuckerberg received the $700 million as a straight salary, he would face a significantly larger tax bill of approximately $259 million.
The Meta dividend taxes will not need to be settled by Zuckerberg or any Meta shareholders until the next tax season. However, it is worth noting that higher-income individuals benefit the most from the preferential tax rates for qualified dividends, as highlighted by IRS figures.
Meta’s plans to commence a quarterly cash dividend from March onwards are eagerly awaited by investors and shareholders.
Sources: MarketWatch
