In a world where most of us try to look for ways to save tax and hire experts to do our taxes, here is a CEO who can boast about willingly paying more tax. Elon Musk, the TIME Person of the Year 2021, will pay more than US $11 billion in taxes this year. This, in spite of being called out by people and politicians for "not paying his fair share of taxes".
For those wondering, I will pay over $11 billion in taxes this year— Elon Musk (@elonmusk) December 20, 2021
And if you opened your eyes for 2 seconds, you would realize I will pay more taxes than any American in history this year— Elon Musk (@elonmusk) December 14, 2021
Elon Musk’s tweet was a tirade against Senator Elizabeth Warren, when Sen. Warren tweeted for a change in the “rigged tax code” in order to compel Musk to “actually pay taxes and stop freeloading off everyone else”. Musk had a spicy reply: “Please don’t call the manager on me, Senator Karen.”
Please don’t call the manager on me, Senator Karen ?— Elon Musk (@elonmusk) December 14, 2021
THE PREVIOUS BERNIE SANDERS SCANDAL
You might also remember how Musk got into a fight with Bernie Sanders on the same issue. It's funny how politicians like Bernie Sanders ask him to pay more tax when he already does:
1. Bernie had tweeted:
We must demand that the extremely wealthy pay their fair share. Period.— Bernie Sanders (@SenSanders) November 13, 2021
2. To which Elon had tweeted
I keep forgetting that you’re still alive— Elon Musk (@elonmusk) November 14, 2021
3. It was a clear invitation to Sanders.
Want me to sell more stock, Bernie? Just say the word …— Elon Musk (@elonmusk) November 14, 2021
SO, WHAT KIND OF TAX DOES MUSK PAY?
Here is an analysis:
Elon Musk, the CEO of Tesla and SpaceX does not give himself a monthly salary. But he plays in shares and that influences the tax he pays to the government. Also, he borrows from the bank against his shares as a security, which he uses to create his lifestyle.
Elon holds 2 kinds of shares:
Elon Musk. Photo: Getty Images
Elon Musk holds some common stock of US $170 million and when he sells any portion of it, he has to pay tax of about 24% (which is set to rise to 32% if legislations are passed by the government). When it comes to ESOPs, tax is paid when the option to buy shares are exercised and taxed at a whopping 53%. So obviously, the better option for him is to sell common stock and pay less tax.
The thing to note is that he doesn’t need to sell common shares, but chooses to do so and pay more taxes. Elon holds 22.8 million shares from his 2012 CEO Compensation Plan that will be exercised in August 2022, which will require him to pay tax at 53%. But since the rates will rise to 57% next year, he chooses to prepay it this year, at a slightly lower rate of 53%. This will amount to about US $11 billion, which is the highest paid amount in the history of America.
Looks like this is what he wants to do.
WHAT'S COMING NEXT
As per Musk's 2018 Compensation Plan, he can earn and exercise about 100 million shares in future years on which he is likely to pay about 49% tax.
IMPROMPTU TWITTER SALE
You might remember how Elon had asked his followers about the sale of US $6.9 billion shares, for which 58% of voters had voted yes for. He had to pay at least US $1.4 billion taxes on that sale. Doesn't seem like something someone who wants to pay less tax would do.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.Do you support this?— Elon Musk (@elonmusk) November 6, 2021
What do you think? Is Elon justified?