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Microsoft CEO sells $285 million worth of stock ahead of new capital gains tax law in Washington state

Microsoft Logo at Ignite
Microsoft Logo at Ignite (Image credit: Windows Central)

Updated December 1, 2021 at 7:46 AM: This article has been updated to include more details regarding the upcoming capital gains tax law in Washington state.

What you need to know

  • Microsoft CEO Satya Nadella recently sold half of his stake in Microsoft.
  • In total, Nadella sold almost 840,000 shares for more than $285 million in a series of transactions.
  • Washington state has a new capital gains tax that will go into effect on January 1, 2022.

Microsoft CEO Satya Nadella recently sold nearly 840,000 shares of Microsoft stock in a series of transactions. Those shares were sold for over $285 million and made up roughly half of Nadella's stake in the company. Details of the sales were outlined in an SEC filing last week. Transactions occurred on November 22, 2021 and November 23, 2021.

According to Microsoft, the CEO sold his shares "for personal financial planning and diversification reasons." The company's statement added that Nadella "is committed to the continued success of the company and his holdings significantly exceed the holding requirements set by the Microsoft Board of Directors."

Some, including the Wall Street Journal, speculate that the move by Nadella may be connected to Washington state's upcoming capital gains tax. The law affects business ownership sales, including a 7% tax on stock sales over $250,000. Specifically, it will tax long-term gains from the sale or exchange of capital assets. That law goes into effect on January 1, 2022, which is the start of the 2023 fiscal year. Coldstream has a complete breakdown of the upcoming law.

If Nadella sold shares of Microsoft after the new tax law went into effect, he would lose a sizeable sum of money compared to what he received through his recent transactions. Microsoft did not mention the upcoming capital gains tax in its statement.

Nadella sold 328,000 Microsoft shares back in 2018 (via CNBC). That sale earned the CEO $35 million. At the time, trade prices ranged from $109.08 to $109.68. In contrast, sale prices ranged from $334 to $349 on the most recent dates Nadella sold shares.

Sean Endicott
News Writer and apps editor

Sean Endicott brings nearly a decade of experience covering Microsoft and Windows news to Windows Central. He joined our team in 2017 as an app reviewer and now heads up our day-to-day news coverage. If you have a news tip or an app to review, hit him up at sean.endicott@futurenet.com (opens in new tab).

8 Comments
  • Well, at least the sale was forced during a good time for the company. It could have been when the company had 80 dollar shares.
  • Is that 7% tax referenced in the article, 7% of the capital gain or 7% of the sale? Over $250k, just in a single year, I hope? Either way, that's an obscenely high tax for a state to add on investment sales. Goodbye retirement wealth in a 401k. If it's 7% of the sale (not just the gains), then that's like a sales tax on your retirement earnings, but I suspect it's only 7% on the gains, which is still bad, but not nearly as brutal.
  • I haven't looked this up but it'll almost certainly be 7% of the capital gains. For MS stock, that'll still be huge (depending on when Nadella got the stocks). I don't know the impact on 401k's but WA state would be insane to tax 401k's. In any case this is an example of why directly taxing capital is stupid. The rich are exactly the people most able to escape the tax by moving their assets around. And the overall impact will be lower investment, which is bad for everyone. Income taxes are still inefficient and distortionary (instead we should do what European countries do and have a VAT), but they're definitely better than this. And don't we want executives to have skin in the game (in the sense of owning stock of the companies they manage, so they have an incentive to not trash the company)? This gives them the incentive to hold less of their company's stocks, not more. Overall, a dumb policy. I'm all for more progressive taxes and transfers but this is not the way to do it.
  • You should look at the tax history, reagonomics do not work. There is no trickle down investment as there is plenty of things the rich could invest in - heck if they wanted they could have started a infrastructure conglomerate and bidded for government contracts. But nope... the infrastructure in the US is disgustingly subpar - There are still lead pipes used for drinking water, the roads are in shoddy state, not to mention the bridges. Also why are teachers having to buy supplies with their own wages? Think about it... Lower investment 🤦‍♂️.
  • TechFreak1, you are definitely more knowledgeable than I on technology matters and I love learning from your posts on those, but you're just uninformed on this topic. Using terms like "Reaganomics" and "Trickle Down" may be good sound bites on the left, but they're not economic arguments. Reagan had a decent general philosophy that the government generally screws up more than it helps, but he was no economist either. Arthur Laffer was the economist Reagan referenced who demonstrated that within the current band of tax rates, reducing tax rates on the wealthy increases tax revenue over time and increasing tax rates reduces tax revenue (at extremely low tax rates, this would no longer apply, but unclear what "low" means: there are arguments ranging from as low as 6% to as high as 22%). Why? Because the wealthy can easily move their money and there are alternatives. This doesn't mean they all do it monolithically, as each will have different threshold triggers, but enough will to make a significant impact on tax revenue, where the greater the tax rate delta between regions, the greater the incentive to move. And if they do move their money elsewhere, then 100% of that moved money is no longer taxed by the original taxing agency. Conversely, if a region lowers its tax rates, this causes more money to relocate to that region, increasing tax revenue, even with the lower rate. This is not disputed by any reputable economists on the left or the right. In fact, Biden's current push for a global 15% corporate minimum tax is intended to mute this effect by giving companies nowhere to go with a tax rate below 15% (if there's no cheaper alternative, they'll stay put). But that's just one of dozens of examples. These are all easily provable mathematically. It's also the case, exactly as Andrew G1 wrote, that investment (whether via millions of individual 401k plans or by billionaires, not talking about government "investment" which is not a thing in economic terms -- a government can spend, it can't "invest" in the economic sense, but I get the political appeal of using that word) is the core driver for R&D. There is a direct correlation to increasing capital gains taxes and reducing corporate spending on R&D. This should not be surprising. This is because companies that have easier access to capital (i.e., increased overall investment rates by investors or lower interest rates for selling bonds or borrowing from a bank) spend the majority of that on growth activities. When they have reduced access to capital, all else being equal (ceteris paribus as economists say), they have less liquidity for growth-oriented spending and focus more on cost cutting. Or, look it it from the perspective of the small entrepreneur or academic who has a great idea he wants to turn into a product or service. These guys don't have the money to do it on their own. They need to go out, hat in hand, and raise money from investors (I can tell you from personal experience that nothing gives an appreciation for the importance of commitment to shareholders like having to raise money from them directly). These investment dollars create new companies who compete, introduce new products, and lower prices for everyone via competitive pressures. Capital gains taxes reduce availability of these dollars, reducing entrepreneurial activity, reducing jobs and slowing macro-level growth. I could go on and on with these examples. They all lead to the same conclusion: keep taxes low and gov't meddling to a minimum and more people will do better with more choices and a higher standard of living than higher taxes and more gov't regulations. If you care about people, you should support lower tax rates (which doesn't mean reduced tax revenue) and minimal regulations. One last point. Yes, there are economists on the left. Many in fact. They wouldn't disagree with the economic points I've made. They would instead say that the reductions in economic activity or growth are worth it for the social justice or environmental causes they support, or as academics, many of them just have a personal animosity toward the wealthy success stories in the private sector. In other words, they are prioritizing their other causes over economics. To me, that's horribly short-term focused and dangerous. Almost universally, the policies advocated by the left hurt those in the lower economic strata the most, yet they are blind to this. Just look at Venezuela, Cuba, U.S.S.R., even France who is finally starting to reverse some of their destructive leftist policies. Some cite China as a good example of leftist policies working, neglecting that China's growth has been that of a free rider on the rest of the world, coming largely from IP theft and hurting its own people via currency manipulation, keeping imported goods very expensive and exported goods cheap, all while engaging in a form of free capitalism with respect to product sales as long as they don't hurt the government power structure (e.g., they have far fewer safety and environmental regulations than even the U.S.). I find it ironic that the same people who speak about the possible dangers to the world and humanity from climate change decades hence (a valid concern) completely neglect the certain reduction in technology and quality of life to humanity in the economic policies they prescribe to reduce climate change (thereby undermining most of their credibility over climate change).
  • I like cake.
  • This article breaks the tax down fully. https://www.coldstream.com/blog/2021/08/11/navigating-wa-state-new-capital-gains-tax/ Notable highlights: Beginning January 1, 2022, Washington state has instituted a 7% capital gains tax on long-term capital gains above $250K. The tax is imposed specifically on long-term gains from the sale or exchange of capital assets. There are a handful of assets that are excluded from this tax. Most notable are real estate, assets held in retirement accounts, and interests in qualified family-owned small businesses. As of the date of this article, there are two lawsuits challenging the constitutionality of this tax.
  • Sean, thanks for the additional information. That is helpful. Interesting that it's long-term, because that means it's mostly going to affect entrepreneurs and their investors. Short-term would hit professional stock traders. Maybe they don't touch that because they figure that's already covered by income taxes...