Elon Musk calls Elizabeth Warren “Senator Karen”, saying he will set all-time record tax bill

He might be right, at least about his 2021 tax bill.

Warren has long argued for raising taxes on the rich by imposing a tax on the assets of wealthier Americans, rather than their income alone. After Musk was named Person of the Year by Time Magazine, Warren complained that he would have to pay more taxes.
“Let’s change the rigged tax code so that person of the year will pay taxes and stop snacking on everyone,” she said. tweeted Tuesday.

Musk, who has never escaped a war on Twitter, responded with a series of insults.

“You remind me of when I was a kid and my friend’s angry mom was just yelling at everyone at random for no reason,” he said in one. Tweeter.
Musk is worth around $ 251 billion, according to Forbes’ Real-Time Billionaires Estimate. But a ProPublica survey reported that in 2018 he and other billionaires paid no taxes. That year he had little taxable income, as he had not sold any shares of his shares and received no salary or cash bonus.

Why Musk will pay at least $ 7.6 billion in taxes this year

But Musk will face a huge tax bill this year – a fact he pointed out in another Twitter response to Warren.
“And if you opened your eyes for 2 seconds, you would realize that I would be paying more taxes than any American in history this year,” he tweeted.
Musk exercised stock options granted to him as compensation in 2012, options that vest when Tesla achieved certain pre-established financial and operational goals over the next six years. These options are due to expire next year. If he doesn’t exercise them by August, he will lose them.

While Musk has yet to pay taxes on their value, he will soon have to pay – and the tax bill will be heavy.

This is because once he has exercised those options, the value of the shares he has purchased, minus the very nominal exercise price of $ 6.24 per share, counts as income. And his bill on those stocks will be at the top federal tax rate of 37%, plus another 3.8% net investment tax on top of that, as well as some unspecified level of income tax. state revenue.

Musk could have waited until next year to exercise those options. But if Democrats are able to pass the Build Back Better bill, it could dramatically increase its federal tax bill. While passage of the bill is by no means certain, it would increase the tax burden on the type of trades Musk makes – perhaps 8 percentage points above what he pays now. This is probably why he exercised the options earlier than he needed to.

So far, Musk has exercised nearly 15 million of the 22.9 million options that were due to expire. And the value of those newly acquired shares was around $ 15.8 billion, which means it faces a federal tax bill of $ 6.4 billion. He sold 6.5 million of those newly acquired shares to pay withholding due on the exercise of options, according to documents he filed with the Securities and Exchange Commission about his stock transactions.

He’s been exercising options and selling stocks every week since early November, and he’s likely to exercise at least 4 million more options, if not more, before the end of the year. That could increase his 2020 tax bill by nearly $ 2 billion more.

Last month, Musk also sold 5.4 million shares he held in trust, most of which have been held since the 2010 initial public offering. These shares will be taxed at a capital gain rate. 20% lower long-term, so it will face an additional federal tax bill of about $ 1.2 billion more on those sales.

So its federal tax bill to date for 2021 stands at $ 7.6 billion, with a chance it could reach nearly $ 10 billion or more by the end of the year.

Wealth tax would cost Musk – if he passes

Musk’s net worth comes mostly from his holdings in Tesla, although the value of his holdings in his other company, privately held SpaceX, is also significant. Over the years, both companies have benefited significantly from U.S. taxpayer support, with Tesla receiving at least $ 6 billion in various tax credits on its electric vehicles and SpaceX signing government contracts worth around $ 10 billion. of dollars.
Warren proposed a wealth tax law earlier this year that would impose a 2% tax on the net worth of individuals and trusts above $ 50 million and less than $ 1 billion, and 3% on holdings of $ 1 billion or more.

Musk, as the richest person, could face a $ 7.5 billion tax bill if this proposal passes, even if he doesn’t trade any shares next year, given the value current holdings. And Tesla’s shares have risen more than any other over the past two years, which means it could pay even more if it continues to rise in value. But so far, this legislation is not about to be adopted.



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