Category: Facebook

With the new dividend, Zuckerberg will receive about $700 million in dividends a year. In recent years, he has received a salary of just $1 annually and no bonus—with his $27 million in compensation in 2022 largely related to personal security expenses.

New York tax expert Robert Willens tells Barron’s that Zuckerberg faces a 23.8% federal tax bite—20% federal tax on dividend income and a 3.8% Medicare surcharge—plus the top 13.3% state income-tax rate in California. 

States unlike the federal government generally offer no preferential tax rate on dividend income versus earned income.

“Since state and local taxes are no longer deductible for federal purposes, he’s looking at a 37 percent “all-in” tax levy on these dividends,” Willens tells Barron’s in an email.

Zuckerberg’s Meta stake is now worth about $168 billion with the shares jumping 21% to $479 Friday as investors reacted to an earnings beat in the fourth quarter and favorable financial guidance. The stock has hit a record in trading Friday. Zuckerberg now is fourth on Bloomberg’s list of the world’s wealthiest individuals behind only Elon Musk, LVMH’s Bernard Arnault and Jeff Bezos.

Barron’s wrote that Alphabet may follow Meta’s lead and initiate a dividend and that other big non-dividend payers like Amazon.com and Tesla could also follow suit.

Alphabet has resisted paying a dividend, preferring to return cash to holders via a large stock repurchase program. It is a prime candidate for a dividend given its ample earnings and free cash flow.

Barron’s has argued that tech giants like Meta and Alphabet can do both—buy back stock and pay dividends. Meta bought back $20 billion of its stock in 2023, and the dividend will cost it about $5 billion annually.

Tech companies that don’t pay dividends have often said it’s due to prioritizing spending elsewhere, particularly in areas of growth. For investors, a dividend is increasingly seen as a sign of management confidence in the business.

Another unstated reason that founder-led companies may not have wanted to pay dividends is that the founders with large equity stakes would face sizable tax bills on the dividends. 

Companies with powerful founders—in either a board or management role—that don’t pay dividends include Alphabet, Tesla, Amazon.com, and Berkshire Hathaway.

Berkshire’s policy has enabled Buffett to minimize his annual tax bill. Buffett released information on his 2015 taxes after he was criticized by then-presidential candidate Donald Trump. Buffett said that he had $11.5 million of income (probably dividend income on stocks that he holds personally) during 2015 and paid $1.8 million in federal income taxes.

Buffett’s stake in Berkshire is now worth over $125 billion with the stock hitting a record high Friday. The Class A shares are up 0.5% at $584,385. With Buffett’s plan to donate his Berkshire stake after his death, he likely will have paid comparably little in taxes over a lifetime despite accumulating enormous wealth.

If Berkshire paid a 1% dividend, Buffett would get over $1 billion of income annually and would pay 30% of that income in federal and state taxes on that.