- Elon Musk’s massive net worth rose $ 37 billion on Monday alone after Tesla’s share price rose nearly 13%.
- The Senate Democrats are devising a plan to tax this kind of asset appreciation for billionaires.
- Musk tore up the plan on the night of his one-day net worth surge on Twitter: “They’ll run out of other people’s money at some point and then they’ll come for you.”
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Elon Musk’s massive personal fortune rose $ 37 billion on Monday, a one-day increase that outstrips the market value of entire companies like Best Buy and Bridgestone Tires.
On the same day it was announced that the Democrats were preparing a new tax proposal that would do just that
could mean billions of dollars in tax debt for Musk and the rest of the world’s richest people.
According to the Bloomberg Billionaires Index, Musk’s net worth rose from around $ 252 billion on Sunday to $ 289 billion on Monday as Tesla’s stock price rose nearly 13 percent on news that car rental company Hertz had a deal announced the purchase of 100,000 electric cars.
The overwhelming majority of the Tesla CEO’s fortune comes from his ownership of a large stake in the electric car maker; its market cap topped $ 1 trillion after the Hertz News surge.
Under current tax law, Musk’s $ 37 billion increase in net worth does not count as income: the increase in the value of an asset, such as a stock or a privately held business, is not taxed until after the asset is sold. As long as Musk holds the majority of his Tesla stock without selling it, he will not pay taxes on those unrealized capital gains.
In fact, most of the richest people in the world have paid a relatively small portion of their wealth in taxes as a result of these policies. In June, ProPublica released an analysis based on IRS tax return data showing that hundreds of thousands, including Musk and Amazon founder Jeff Bezos, have paid absolutely no income taxes in recent years.
That could change in the near future with a proposal by Senator Ron Wyden for a “billionaires income tax” aimed at these kinds of unrealized capital gains for the richest Americans. While the details of the plan are still being worked out, and due to be released in the next few days, the basic idea is to treat the increase in the market value of assets like stock holdings as taxable income for billionaires and super-earners.
If you own a billion dollar stock in a company earlier in the year, and that stock rose 50% by the end of the year, you would have $ 500 million in income subject to the new proposed tax even if you did You don’t sell a single share.
That suggestion would hit someone like Elon Musk pretty hard. As noted, the details of the plan are pending, but assuming that unrealized gains would be taxed at about the current maximum rate of 20% for realized long-term capital gains, Musk’s one-day recovery of $ 37 billion could result in a tax bill in $ 7.4 billion.
Musk denigrated the tax proposal Monday night, warning that although the plan is strictly limited to billionaires and super-earners – fewer than 1,000 Americans would likely be affected by the tax – it could open the door to similar taxes for those with more modest wealth. “At some point they run out of other people’s money and then they get you,” he wrote on Twitter.
Still, most Americans are unlikely to make $ 37 billion in unrealized capital gains in a single day. Wyden hit back at Musk on Tuesday night. “The people who are clearly trying to be tricky are people who are trying not to pay taxes,” he told reporters.