Tech IPOs could be windfall for California budget

Governor Newsom is more fiscally responsible than most. It will be more difficult for him than Governor Brown to say, "No". Newsom commands less respect, and has less experience, than Brown. But don't forget that Newsom was Governor of San Francisco during the Great Recession, and San Francisco was the only large city in the state to maintain a balanced budget. Part of that was a pre-existing mandate that SF maintain a rainy day fund; but part of it was Newsom's City Hall extracting major concessions from unions and interest groups, shrinking expenditures. And SF wasn't as filthy rich as it is now. The big migration of tech from South Bay to the city didn't really get moving until about 2011.

If you want low taxes and little government regulation why not move to a banana republic?[1] The answer is because we don't live in a vacuum--policies matter, otherwise you're just pissing into the wind.

The entire purpose of government is to overcome the free rider problem. If you can't rely on people acting in the same socially responsible manner, then doing it alone (especially at scale) is not only fruitless, it can be outright counterproductive. Coordination of socially responsible behavior is a mixture of social, political, legal, and cultural (e.g. religious) norms. In a diverse society the political and legals components are particularly important.

[1] That's not an entirely rhetorical question. I've met people in South America who have done exactly this. One was a gold standard proponent who found some success in Ecuador as a real estate broker and manager for expat investors. Another was roaming around some pretty sketchy areas of Venezuela, Columbia, and Ecuador looking for a place to settle--his wife got tired of his anti-Bush, anti-Obama rants, called his bluff and told him to go figure things out and call her when he found a place to settle. Those two left the U.S. specifically because of their libertarian political beliefs. I've met many others with more mixed motivations.

EDIT: I respect those two for leaving. Remember, Socrates chose death over leaving Athens, but was he trying to make a particular point. Exile was nonetheless an ethically acceptable option, too. What's not ethically acceptable is staying and skirting the rules. The analogous acceptable behavior in this case would be moving to Texas to make your point but paying your California taxes on the IPO as the ethically responsible thing.

> The entire purpose of government is to overcome the free rider problem.

Can you expand on this?

The U.S. was founded by people who fled to find reprieve from taxes and a government that you could describe as a"free loader".

Most colonists fled religious persecution or were seeking economic opportunity, and in some cases were moving to a place with more onerous taxes.

The founding of independent government was about political self-determination. It most assuredly was not anti-tax. Nowhere in the newfound state governments was taxation limited; rather, AFAIU in all the new states the power to tax given to the legislature was absolute and unlimited! Federal taxation was limited, but that was out of concern for preserving the self-determination of each individual state.

The guiding principle behind early American politics was that representative democracy was sufficient to constrain unfair taxation. In fact, the inability of the federal government to fund itself through direct taxation of the people, instead having to rely on funding from state governments which it could not compel, is one of the most important reasons the Articles of Confederation were deemed a failure. The new U.S. Constitution conspicuously granted the new federal government direct taxation powers.

I think many people today, both liberal and conservative, would agree that the Founders' ideas about taxation were too simplistic. Conservatives might want more structural limitations, and liberals might want rules about distribution. But the Founders were definitely not anti-taxation. Early Americans weren't, "No taxation!" They were, "No taxation without representation!"

There's some competing priorities. If you move, chances are you're leaving the job, which you might like, and the job market (yes, other markets exist, but they're not the same). That may mean missing out on future vesting.

If you're vesting non-quals or RSUs after the IPO, California is going to tax you on some portion of it anyway, so that makes it harder to stick it to the (California) man.

It takes time to make a move, if you haven't already thought about moving to places that happen to be tax free.

At the same time, diversifying sooner is definitely worth paying CA tax for. I'd rather pay 13% (or whatever) or $$$$ than 0% of $$$.

Anyway, the right thing to do tax wise is somehow get your shares into a roth account while they're not worth much... Then we they become worth a lot, you can diversify without a tax penalty, and you can setup a 'substantiallly equal periodic payment' plan to access the earnings.