Mark Zuckerberg is spending millions like never before to overhaul a landmark law

Mark Zuckerberg is spending millions like never before to overhaul a landmark law

2020-10-12 12:10:00
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Mark Zuckerberg is politically worn down these days — besieged from both the left and the right and watching what little political capital he had amassed over the last decade deplete itself with each new data scandal and congressional flogging.

And yet Zuckerberg has chosen to embark on a decidedly dicey political crusade: an attempt to touch the so-called third rail of California politics — the state’s 40-year-old landmark tax law — in the most expensive electoral play of the billionaire’s career.

Zuckerberg has been waging a costly and risky political battle for more than a year against California’s Proposition 13, the law that critics say has hamstrung the state’s economy by capping its property taxes, and thus underfunding two priorities of Zuckerberg and his wife, Priscilla Chan: schools and housing. While other tech leaders have conspicuously avoided weighing in until the very last minute, if at all, Zuckerberg stuck his neck out early and has now spent almost $11 million — including $4.5 million more just this month — on the cause, raising the stakes for Election Day.

Zuckerberg is backing what is called the “split roll” reform measure through his and his wife’s philanthropy, the Chan Zuckerberg Initiative. For the past year, he has been a key player behind the scenes and the only major Silicon Valley leader who has publicly endorsed it. And because he has been so alone in this effort, the vote on Prop 13 reform in some ways serves as a test of his and his ambitious philanthropy’s political muscle.

Zuckerberg and Chan, who personally signed off on the effort and have made it a strategic priority inside CZI, are just two of many donors behind the new measure. They are not playing an operational role nor are they involved in day-to-day strategy. But because Zuckerberg is its highest-profile supporter, his money has also made him a target for the measure’s opponents, who are eager to make him a piñata in the election and capitalize on his toxicity, as CZI aides expected.

“If he thinks more money should go to education, why doesn’t he pull in some of his money from overseas and put that money into education?” poked Rob Lapsley, the head of the California Business Roundtable, the group leading the opposition. “There’s a lot of bad feelings in the business community toward him and what he’s doing on this.”

The Facebook founder has stumbled before in his advocacy work. The $100 million that Zuckerberg donated to Newark, New Jersey, schools in 2010 at the request of Newark mayor Cory Booker and New Jersey governor Chris Christie accomplished little. The immigration and criminal justice reform group that he started three years later, FWD.us, faced its share of early struggles. And Zuckerberg has managed to enrage all comers with his mistakes in his day job at Facebook, particularly in the run-up to the presidential election.

So if Zuckerberg accomplishes big political wins at CZI — which is structured as a hybrid between a traditional philanthropy and a political advocacy organization — it will offer one of the world’s wealthiest people a new avenue to improve his civic record.

“This is perhaps something of a do-over,” said tech historian Margaret O’Mara, surmising that Zuckerberg has learned a lesson about his own limitations from these previous struggles. “We’re seeing the political education of all these tech leaders in real time.”

Mark Zuckerberg’s political gamble

Split roll, or officially this year’s Proposition 15, is just one of many political projects, including a push for education reform and four other CZI-backed ballot initiatives in California this year, undertaken by the five-year-old philanthropy, which now has 400 employees. But it is by far the most expensive — and therefore high-stakes — electoral battle CZI has picked yet.

That’s because what Zuckerberg is attacking isn’t just a California tax law. It’s the nucleus of the modern, national anti-tax movement.

Anti-tax activists like Howard Jarvis helped push through California’s iconic law four decades ago.

When Proposition 13 passed in California four decades ago, it capped both residential and commercial property taxes by assessing most property’s value based on how much it was worth as far back as 1976, with minimal established tax increases. Homeowners and businesses alike embraced the legislation, but critics say it has left California with far less money for schools, roads, and other social services for its 40 million residents. Studies say that California, which has the highest poverty rate in the country and is grappling with a housing crisis, needs as many as 3.5 million new homes by 2025 and $22 billion more in school funding.

This year’s Proposition 15 would reform Prop 13 so it only applies to residential properties. Homeowners’ taxes would stay the same while many businesses’ property tax rates would go up. That’s why it’s called “split roll.”

The split-roll fight was expected to be explosive — but then the coronavirus pandemic overwhelmed California politics and took up voters’ attention. That might be why you haven’t heard as much as you might think you would about the chance to finally amend a landmark law that undergirds so much of life in California. The most recent polls have shown the split-roll effort with just over 50 percent support.

On the surface, the battle lines appear like a stereotypical business-versus-labor streetfight. Organized labor has long been the force behind split roll, which proponents say would raise $12 billion yearly for the state to spend on schools and housing programs favored by unions. And traditional corporate interests — particularly those from the real estate industry — are spending tens of millions to beat split roll, which makes sense, given that, for some of them, a property tax increase is an existential threat to their corporations. They also argue that a recession is the wrong time to raise taxes on small businesses.

But then you throw in Zuckerberg and the picture gets more complicated. And that’s the point.

“Having visible tech industry support is helpful in funding the measure — but it also sends a clear signal that this is not an attack on the business community,” said Scott Wiener, a California state senator who is close with many tech leaders and is backing the measure.

But the support of Zuckerberg goes beyond the $11 million check. A CZI-backed nonprofit, TechEquity Collaborative, and its leader, Catherine Bracy, have been leading the effort to convince other tech companies and workers to get off the sidelines and support split roll, too. At a fundraiser for the measure that TechEquity hosted last year at the headquarters of the food-delivery startup Postmates, Weiner recalled about 80 people, largely from the tech industry, crowding into a room and offering strategy suggestions and getting organized for the fight to come.

Facebook CEO Mark Zuckerberg looking at his cellphone.

Mark Zuckerberg has played a role behind the scenes trying to get other tech billionaires to endorse the split-roll measure.
Drew Angerer/Getty Images

Zuckerberg also did some initial outreach on his own to other tech billionaires to try and rally them to his side. And one tech leader pitched on funding split roll said CZI’s support was used by proponents in private meetings to help validate and sell the effort to Zuckerberg’s peers in the industry.

But billionaires can be a rivalrous bunch, and sources say there were concerns that some of them would actually be turned off by Zuckerberg’s involvement.

A fierce lobbying battle across Silicon Valley

Over the last few years, seemingly every Silicon Valley giant has unveiled much-ballyhooed financial commitments to support affordable housing in the Bay Area. Apple promised to spend $2.5 billion last fall. Facebook announced $1 billion in new grants and loans around the same time.

But none of them have come out in favor of reforming Proposition 13.

That’s why, to split-roll activists, these announcements are hollow. If these corporations really wanted to support nearby communities, the thinking goes, they’d fight to change the system rather than throw nickels at tinkering with the status quo under the banner of “philanthropic altruism,” as Bernie Sanders named it.

Rather than depending on this after-the-fact charity, split-roll proponents argue that its passage would remove the incentive for cities to charge fees to developers that then are passed along in higher rents, a process that leads to less housing construction. Its opponents argue that it is California’s bureaucracy, not its tax system, that is to blame for the housing shortage.

Publicly, very few tech leaders or companies have endorsed split roll. The only Silicon Valley players that came out in favor of it until recently were Zuckerberg and Postmates. Tech companies are often ultra-cautious when it comes to advocacy campaigns, only acting after assessing how much heat they’ll come under from activists, the media, and other companies if they fall on one side or the other. And they’re especially cautious if the ballot initiative doesn’t directly affect their bottom line.

That’s why advocates tried to create pressure and change that. Behind the scenes, well-funded forces — including CZI — twisted arms and lobbied some of the biggest players in business to try to build a coalition of marquee names.

The Silicon Valley Community Foundation, which advises the philanthropic work of many tech billionaires and is backing split roll, has been pitching its clients for more than a year on spending their money on the split-roll fight, including at a town hall held last month. Billionaire powerbroker Ron Conway, who had intentionally avoided the issue, last month decided to co-host a fundraiser for the measure alongside CZI political adviser and former Obama campaign manager David Plouffe, according to a copy of the invitation obtained by Recode.

A copy of a fundraiser invitation for the split-roll effort.

A fundraiser co-hosted by billionaire powerbroker Ron Conway for the split-roll campaign.
Recode

But tech billionaires have on the whole proved timid, despite years of private meetings from split-roll proponents who came around asking for million-dollar-plus contributions but came away empty-handed. For instance, Sam Altman, the former head of Y Combinator, had talks with proponents about making a major contribution to the split-roll effort, but then ultimately declined, according to two people familiar with the matter.

The real big fish, though, were Silicon Valley’s iconic companies — and largest landowners. Six companies were the core targets of lobbying efforts on both sides: Apple, Facebook, Google, Stripe, Square, and Salesforce. And for months, all of them punted.

In theory, tech had some unique rationale to back Prop 13 reform. Most tech companies were, of course, not around in 1976 — and so they have far less to lose than traditional California businesses that sit on low-taxed property as a result of Prop 13. And at the same time, these tech companies’ workforces suffer from the consequences of high housing prices and under-funded schools — and are under pressure from employees to act.

Backing split roll could have proven to be a good political move, too. Some companies thought it could have given them a chance to strengthen their ties to organized labor, a persistent critic of tech. Others saw it as a way to take the air out of tax measures that activists push to punish tech companies specifically.

Those political considerations might explain why, in an era when companies are nervous about being shamed as poor corporate citizens, at least none of the tech giants are loudly opposing split roll. All but one of the six targeted companies declined to comment when asked to share their thinking on split roll.

Of those six, Salesforce’s unwillingness to endorse split roll has been the most surprising to close observers. Salesforce, the largest private employer in San Francisco and led by Marc Benioff, a voluble CEO who has called for tech companies to pay more in taxes, was seen as the biggest possible “get” by the backers of split roll. And keeping him at least neutral was seen as a major priority for those opposing it.

For a while, the opponents succeeded. One tech leader close to the split-roll effort said last year that they saw Benioff’s lack of involvement as a flashing warning sign of the effort’s struggles to gain tech support.

But a month before Election Day, Recode has learned that Salesforce is now coming out for the measure. The company is making a $400,000 contribution to the effort.

“We’re supporting California Proposition 15 because it’s an important step in addressing the resource deficits that both our schools and local governments face,” a company spokesperson said. “COVID-19 has shown how important it is to support our local and state institutions as they are the backbone of our communities.”

Salesforce Founder & Co-CEO Marc Benioff Visists “Mornings With Maria”

Marc Benioff, the voluble CEO of Salesforce, is backing the measure.
Roy Rochlin/Getty Images

Google and Apple met with both sides to try to make a determination about whether to weigh in, but neither ultimately has.

And then there was Facebook — which, having been founded by the same person who founded the Chan Zuckerberg Initiative, put it in an unusual situation. Getting Facebook to come out in favor of the proposal was a key priority of those backing split roll — although, like many other tech companies, it seems to have ultimately decided this didn’t rank as a political priority in 2020.

“They’re fighting other fights,” said Fred Main, a California lobbyist who works closely with tech companies. “Will they see the fight over dollars — which is really what the property tax comes down to — as their fight?”

CZI officials take pains to point out that it and Facebook are separate entities, although work at the latter sometimes affects work at the former. In theory, the two institutions can disagree. But opponents are making it plain that they see “zero” distinction.

“We see CZI as a tool of Mark Zuckerberg and Facebook. It’s a tool in his toolbox,” said Lapsley, who alleges CZI’s support is an attempt to stamp out small business rivals to Facebook and for the company to curry favor with public-sector unions. “It’s a very cynical and transparent ploy.”

CZI, obviously, takes umbrage at that accusation.

“Look at what CZI is tackling — some of the most inequitable, unjust systems in our country: Immigration, housing, criminal justice reform, education,” said Mike Tronsoco, CZI’s leader of its Justice and Opportunity initiatives. “Our decisions are made based on whether they impact these issues in a meaningful way, not on what’s good for another company or for Facebook. If we were looking for quick positive wins, we certainly wouldn’t be setting 100+ year goals and taking on some of the toughest policy fights out there.”

But the problem for Zuckerberg is that, in this political climate, everything he touches has become indelibly linked to the man himself. In recent years, some groups backed by Zuckerberg have begun downplaying their ties to him as he has grown more unpopular.

When CZI backed a ballot initiative in Ohio in 2018 to defelonize drug possession, for instance, opponents zeroed in on Zuckerberg’s $3 million in donations, with one opposing politician publicly saying that she took “particular exception to Mark Zuckerberg” because he would not suffer any consequences from the initiative’s passage. “There will be people who will die,” she said starkly.

A similar thing is happening in Zuckerberg and Chan’s home state in 2020. Split-roll opponents online have latched onto Zuckerberg’s involvement, authoring one op-ed, for instance, alleging that he would ruin California’s economy and turn it into a “Silicon Valley ghetto.” Lapsley said he brings up Zuckerberg’s donations in every meeting he has with prospective donors, using the specter of the billionaire to motivate his own supporters to dig deep.

Last month, a group of Black-led and Hispanic-led groups including the California NAACP, which opposes the measure, went on the attack, sending Zuckerberg a letter arguing that for minority-owned businesses, the “last thing they need is a billionaire pushing higher taxes on them under the false flag of social justice.” They banged that drum again publicly last week.

That’s all a reminder that Zuckerberg is not just any political donor these days. He is a juicy target, too.


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