So why does he complain all the time?
By Stephen Land, Bob Lord
Then SpaceX stock tanked, rallied, then tanked again. But
the most important thing about Musk’s wealth isn’t whether it stays above the
13-figure threshold — it’s that 94 percent of it comes from
not having to pay taxes on unrealized gains.
That’s right: Musk’s fortune effectively comes from not
paying taxes.
It’s no exaggeration to say that trillionaires (Musk likely won’t be the last) are creatures of the tax code.
They ought to be called
“taxillionaires.” If it weren’t for laws that permit the wealthy to endlessly
defer paying taxes by keeping their gains unrealized, there would be no
trillionaires — and many fewer billionaires.
According to Musk’s own account, when he sold his stake in
Paypal in 2002, he netted
$180 million, invested it all in SpaceX and Tesla, and borrowed to pay his
living expenses. To get from $180 million to a trillion today implies annual
returns of over 40 percent (returns that would be considered impossible for
ordinary investors).
Allowing these returns to compound untaxed supercharges
growth.
Musk paid some taxes along the way, when he exercised stock
options or sold some Tesla shares, but any taxes he paid are insignificant
compared to his wealth. By contrast, for most working Americans earning a good
salary, total state and federal taxes are significant — typically around 40
percent.
They can put limited amounts in tax-deferred IRAs, 401(k) plans, and the like. But most of their savings comes from net paychecks after withholding for federal, state, local, Social Security, unemployment, and Medicare taxes. Musk is effectively exempt from these taxes.
But he doesn’t have to be.
Suppose he were subject to the same taxes on his annual
wealth increase that most higher-earning Americans pay on what they make, and
had to sell some Tesla and SpaceX shares to pay those taxes. We crunched the
numbers based on the latest figures, and found he’d be worth around $47 billion
today — rich enough to afford the most lavish lifestyle imaginable, but not a
trillionaire, and not richer than the GDP of most countries.
It’s the same story for Jeff Bezos, Warren Buffett, and
other multibillionaires.
The vast bulk of their fortunes came from not paying taxes
on their wealth as it grew. Without endless tax deferrals, they would have only
a tiny fraction of what they own today (although that tiny fraction would still
be a huge amount of money). Yet as things stand today, nothing stops them from
wielding the power and influence their wealth buys to benefit themselves.
In the 2024 elections, Musk was the
largest campaign donor, giving $291 million. That’s chump change for him,
but it bought unprecedented power: lucrative
contracts, the suspension
of investigations of Musk’s businesses, access to government data, and
the authority to dismantle government programs — including disruptions to
foreign aid which are projected to result in over
14 million people dying from preventable diseases.
It’s a vicious cycle of wealth begetting power which begets
more wealth, diverting it from the needy and vulnerable. We’re in the grip of
unprecedented power accumulated by private, superrich individuals.
We can check their power by fixing the untaxed wealth
problem. We should end the practice of funding billionaires’ and trillionaires’
accumulation of power at public expense by letting them amass yet larger
fortunes without paying taxes. We should adopt sensible policies requiring them
to pay their fair share, such as the Billionaires
Minimum Income Tax Act introduced in Congress in 2023.
Over the next decade, we will face crisis-level
national debt and unmet needs for healthcare and retirement income.
That will force us to decide whether to leave the vast pool of billionaire and
trillionaire wealth untouched, or tax them like the rest of us to curb their
influence and address public needs. The choice is ours.
Stephen
Land, Bob Lord:
Stephen Land is a retired tax attorney and former Chair of the New York
State Bar Association Tax Section. Bob Lord, an associate fellow at the
Institute for Policy Studies, currently serves as Senior Vice President for Tax
Policy at Patriotic Millionaires. This op-ed was distributed by
OtherWords.org.
