He could be right — at least about his 2021 tax bill.
Warren has long advocated raising taxes on the rich by taxing the wealth of the richest Americans, rather than just their income. After Musk was named Person of the Year by Time magazine, Warren complained that he should pay more taxes.
Musk, who never shied away from a Twitter war, responded with a series of insults.
“You remind me of when I was a kid and my boyfriend’s angry mom just randomly yelled at everyone for no reason,” he said in a statement.
tweet.
Musk is worth an estimated $251 billion, according to Forbes’ Real Time Billionaires estimate. But an investigation by ProPublica reported that he and other billionaires paid zero taxes in 2018. That year, he had little taxable income, as he sold no shares of his stock and received no cash salary or 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’d realize that I will pay more taxes this year than any American in history,”
he tweeted.
Musk has exercised stock options that he was awarded as compensation in 2012, options that vested when Tesla reached a number of pre-agreed financial and operational goals over the next six years. Those options expire next year. If he doesn’t exercise them in August, he loses them.
While Musk hasn’t paid any taxes on their worth so far, he’ll soon have to pay — and the tax bill will be significant.
That’s because once he exercises those options, the value of the stock he acquired, minus the very nominal strike price of $6.24 per share, counts as income. And his account on those stocks will have the highest federal income tax rate of 37%, plus an additional 3.8% net investment tax on top of that, along with an unspecified level of state income tax.
Musk could have waited until next year to exercise these options. But if Democrats can pass the Build Back Better bill, it could significantly increase his federal tax bill. While the bill’s approval is far from certain, it would increase the tax burden on the kinds of transactions Musk did — perhaps by 8 percentage points above what he pays now. That is probably why he exercised the options earlier than necessary.
To date, Musk has exercised nearly 15 million of the 22.9 million options that were due to expire. And the value of that newly acquired stock was about $15.8 billion, meaning he faces a $6.4 billion federal tax bill. He sold 6.5 million of those newly acquired shares to pay the withholding due upon exercise of the options, according to filings he made with the Securities and Exchange Commission regarding his stock transactions.
He has been exercising options and selling stocks every week since early November and will likely exercise at least 4 million more options, if not more, before the end of the year. That could boost his 2020 tax bill by nearly $2 billion more.
Last month, Musk also sold 5.4 million shares that he held in custody, most of them since the 2010 IPO. Those shares will be taxed at a lower long-term capital gains rate of 20%, so he will receive an additional federal tax bill from about $1.2 billion more on those sales.
So his federal tax bill so far for 2021 stands at $7.6 billion, with a chance it could climb to nearly $10 billion or more by the end of the year.
Wealth tax would cost Musk – if it goes through
Musk’s wealth comes largely from his holdings in Tesla, although the value of his holdings in his other company, the privately-owned SpaceX, is also significant. Over the years, both companies have benefited significantly from US taxpayer support, with Tesla receiving at least $6 billion from various tax credits on its electric vehicles, and SpaceX signing government contracts worth about $10 billion.
Warren proposed a wealth tax bill earlier this year that would impose a 2% tax on the assets of individuals and trusts worth more than $50 million and less than $1 billion, and 3% on those holding companies of $1 billion or more. Lake.
Musk, as the richest person, could face a $7.5 billion tax bill if that proposal were passed, even if he didn’t trade stocks next year, given the current value of his assets. And Tesla stock has risen more than any other in the past two years, meaning it could pay even more if it continues to appreciate in value. But that legislation has not yet been passed.
