Tesla CEO Elon Musk is among the most popular yet controversial business leaders. He has sold billions of dollars worth of Tesla shares in 2021 and owes significant taxes on them. Billionaires like Musk are often accused of not paying their fair share of taxes. Does Musk pay taxes? How much tax will he pay in 2021?
Tesla stock has risen sharply since October 2019. The stock rose 740 percent in 2020. Despite its recent crash, the stock is in the green this year. In November, Musk’s net worth reached $318 billion, according to Forbes.
Elon Musk is still the world’s richest person.
Currently, Musk has a net worth of $244 billion and is still the world’s richest person. He has the distinction of becoming the world’s first person to have a net worth in excess of $200 billion. While Musk is the richest person ever in absolute terms, in inflation-adjusted terms Mansa Musa is the richest person who has ever lived. He ruled the Mali Empire between 1312 and 1337.
Net worth: $244 billion
Tesla CEO Elon Musk is currently the world’s richest person. He has been selling Tesla shares and will pay over $11 billion as taxes in 2021.
Musk has been accused of not paying enough taxes.
Many people on the left side of the political divide accuse billionaires like Musk of not paying their fair share in taxes. In November, Musk got into a verbal brawl with Senator Bernie Sanders over his tweet calling for taxing the rich.
How much does Elon Musk pay in taxes?
Musk only paid $70,000 in federal taxes between 2015 and 2017. In 2018, he didn't pay any tax at all. His “true tax rate” between 2014 and 2018 was much lower than the 3.27 percent that the average U.S. household pays.
Meanwhile, billionaires like Musk have most of their wealth parked in stocks where they don’t owe taxes until the shares are sold. Musk doesn't take any salary or bonus from Tesla and all of his compensation is in the form of stock options. He pays taxes when these stock options are exercised. While Musk is the world’s richest person, he's cash poor and has to borrow against his Tesla holdings.
Musk will pay $11 billion in taxes in 2021.
Musk held a Twitter poll on whether he should sell 10 percent of his Tesla shares. The majority responded in the affirmative and he went on a stock selling spree. Musk said that he's selling the shares to answer those who say he doesn't pay his fair share of taxes.
In a tweet, Musk has said that he will pay more than $11 billion in taxes. While Musk has been trying to portray the stock sale as a way of paying his fair share of taxes, he would have had to sell the stock anyway to pay for the taxes due on his stock options. Also, he sold the shares after Tesla’s market cap crossed above $1 trillion.
Billionaires don’t pay much taxes.
Musk was also named the “Person of the Year” by Time Magazine. Musk isn't the only billionaire who has been accused of not paying enough taxes. There have been instances when billionaires like George Soros, Carl Icahn, and Michael Bloomberg didn't pay any federal tax in a year.
There has been a growing clamor for coming up with tax rules to tax the super-rich. While many people think that it's a bad idea and fear that it might lead to billionaires seeking tax havens, there's certainly merit in exploring ways to get billionaires to pay more taxes.