Elon Musk denounced the Democrats’ “billionaire tax” proposal, but that would still leave him as the richest person in the world.
Musk warned the government could “come for you” when it runs out of money, but the United States has spent more than it taxed for decades.
The new tax would still allow Musk to keep $ 28 billion of his $ 37 billion increase in wealth on Monday as Tesla’s market cap exploded.
Elon Musk this week slammed Democrats’ latest plans to tax billionaires to pay for their social spending plans, saying on Twitter, “Finally, they don’t have any more money for the others and then they come looking for you.”
But who are the “other people” and the “you” here? For the majority of Americans, income taxes have long been a reality, accounting for almost half of the money the US government collects.
America’s richest, on the other hand, largely paid a lower tax rate by seeing their wealth accumulate in the form of assets, not annual wages. Musk’s argument plays on illogical fears that lawmakers will then target ordinary Americans, when the reality is that after the rich have used loopholes for decades, some of them are starting to close.
The richest pay less tax
The United States has used a progressive tax system since 1862.
The highest tax brackets and rates have changed over time as Americans earn more, but the highest rates have become ineffective due to an explosion of loopholes. Oregon Sen. Ron Wyden’s plan doesn’t mark a new era of strict taxation, it simply requires billionaires to pay taxes on their biggest source of income: the stock boom.
The richest man in the world tore up the tax proposal on Monday, saying it unfairly hijacked the wealth of America’s wealthiest citizens. The question boils down to “who’s better at allocating capital – governments or entrepreneurs,” Musk wrote in one of the many. tweets on tax policy.
Yet the richest Americans have long paid a smaller share of their income than those who earn much less. Many billionaires protect their wealth by taking a relatively low salary and placing most of their net worth in assets such as stocks, which are only taxed when they are sold and the profit is locked in or “made.” . But billionaires often hold stocks throughout their lives and pass them on after death, leaving the majority of their net worth totally tax-free, while using their wealth to get super-cheap loans from banks where they park their assets.
Musk, for example, saw his net worth surge by $ 37 billion on Monday when Tesla’s stock price jumped nearly 13%. Under the current system, he is not required to pay taxes on these earnings.
Wyden’s proposal would levy the usual 23.8% capital gains tax on the increased value of unsold assets, meaning billionaires like Musk, Jeff Bezos and Bill Gates would have to pay taxes on their huge profits in actions. For Musk, the initial bill on his stock gains would be around $ 50 billion, according to an analysis by Gabriel Zucman, a left-wing economist at the University of California at Berkeley. Wyden’s proposal would allow Musk to pay that amount over a five-year period.
This would mark a radical departure from the tax rates billionaires have been paying for several years. Analysis of IRS tax return data released by ProPublica in June showed that some of the wealthiest Americans – including Musk – paid nothing in income taxes for a few years. Musk in particular paid $ 455 million in taxes from 2014 to 2018, barely 3.27% of his fortune, according to the report.
If the tax became law, Musk would remain the richest man in the world with a healthy margin, with a net worth of around $ 202 billion, at market close on Tuesday. Bezos is said to be the second richest American with a net worth of around $ 149 billion.
Musk’s stock windfall on Monday would still be worth more than most Americans earn in a lifetime. A 23.8% tax on the bond would turn the profit of $ 37 billion into a gain of $ 28.2 billion.
If that sum represented all of Musk’s net worth, he would still be richer than 99.5% of Americans.
Read the original article on Business Insider