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Elon Musk

Elon Musk Faces $10 Billion Tax Bill as He Spars With Elizabeth Warren

Musk faces the unusually high tax bill after exercising almost 15 million options and selling millions of shares to cover taxes.

(Bloomberg) -- Elon Musk’s exercise of an unusually large number of options is boosting his claim that he’ll pay more taxes this year than any other American in history, as he spars with Senator Elizabeth Warren over wealth inequality.

The world’s richest person and chief executive officer of Tesla Inc. could face a tax bill of more than $10 billion for 2021, if he exercises all his options due to expire next year, according to Bloomberg calculations. While it’s hard to say whether that would be a record -- the Internal Revenue Service doesn’t publicly reveal individual tax filings -- it would certainly rank as one of the biggest payments of all time.

Even a $10 billion payment is just a fraction of Musk’s overall wealth. His net worth is a quarter of a trillion dollars on the Bloomberg Billionaires Index, having risen by $95 billion so far this year.

His latest Twitter spat with the Massachusetts senator began after Warren blasted the tax code for being “rigged” and asked to change it “so The Person of the Year will actually pay taxes and stop freeloading off everyone else.” 

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

Musk faces the unusually high tax bill after exercising almost 15 million options and selling millions of shares to cover the taxes related to the transactions. That was following a Twitter poll last month where he asked whether he should sell 10% of his stake in Tesla -- shares of which have rocketed higher more than 2,300% in the past five years.

Musk could end up saving a couple of billion dollars in capital-gains taxes he’d otherwise have owed to California because of his move Texas (it has no state income tax or capital-gains tax on individuals), according to calculations by Bloomberg News.

A report by ProPublica in June said Musk paid little income tax relative to his outsize wealth. He has pushed back against this characterization, saying he doesn’t draw a salary from either SpaceX or Tesla, and pays an effective tax rate of 53% on stock options he exercises. He added that he expects that tax rate to increase next year.

Musk isn’t the only billionaire likely to pay a big tax bill this year. Stock sales by the top U.S. billionaires have more than doubled this year, as the richest Americans unload shares after a run-up in stock valuations and before a potential tax hike in 2022.

So far this year, Jeff Bezos -- the world’s second-richest person -- has sold more than $9 billion in Inc. stock, and Mark Zuckerberg has liquidated $4.5 billion in shares of Meta Platforms Inc. -- formerly known as Facebook. Both men are likely to pay a lower tax rate than Musk, partly because their sales are designed to fund charitable endeavors, which allow tax deductions.

Democrats and progressives have been arguing for expanding the definition of income to include wealth gains. Senate Finance Committee Chairman Ron Wyden has proposed a billionaire’s tax, an annual levy on the wealthiest American’s unrealized gains in publicly traded assets like Tesla.

Musk has previously used Twitter to berate senators Bernie Sanders and Wyden over their support for a tax on billionaires.

--With assistance from Tom Metcalf and Cecile Vannucci.

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