Elon Musk will be participating in TIME Person of the Year on December 13, 2021 in New York City. Theo Wargo / Getty Images for TIME
The richest man in the world, Elon Musk, is expected to make what may be the largest single tax payment ever to the Internal Revenue Service this year. “For those who wonder, I’ll be paying over $ 11 billion in taxes this year,” tweeted the CEO of Tesla and SpaceX on Sunday evening.
It was apparently part of his response to Senator Elizabeth Warren (D-Mass) claim last week that he was not paying enough taxes and “writing off everyone else.”
“Let’s change the rigged tax code so the Person of the Year actually pays taxes and stops dumping everyone else,” Senator Warren tweeted last Monday, marking a Boston Globe article about Musk’s nomination as “Person of the Year.”
In response, Musk tweeted, “If you opened your eyes for 2 seconds, you’d see that this year I’ll be paying more taxes than any American in history.”
That $ 11 billion figure is in line with what the media calculated based on Musk’s stock option plan. In the past few weeks, the billionaire has exercised a block of expiring Tesla stock options and paid out millions of Tesla shares to cover tax withholding obligations associated with the exercise.
The stock options, granted to Musk as part of a performance-based compensation package in 2012, allow him to buy approximately 22.8 million Tesla shares at $ 6.24 each and sell them instantly at market price. Profits from these types of transactions are subject to the top federal and state income rates, which in the case of Musk would add up to over 50 percent.
He paid a similar tax bill of about $ 583 million in 2016 when he exercised stock options in excess of $ 1 billion.
While $ 11 billion is an unthinkable number by any personal finance measure, it pales in comparison to Musk’s 2021 wealth gain, which was $ 87 billion according to the Bloomberg Billionaires Index. His total assets were most recently $ 243 billion.
All the more sobering when you consider how little taxes the Tesla CEO has paid in recent years.
A ProPublica investigation of leaked IRS data in June found that Musk paid less than $ 70,000 in federal income tax in 2015 and 2017, and nothing at all in 2018. Even taking into account his high tax bill from 2016, his five-year “true tax rate” from 2014 to 2018, calculated on the basis of his wealth growth over the period, was only 3.27 percent.
“This is a great lesson for the public about denominators. A large number versus a much, much larger number is actually a small percentage, ”said ProPublica reporters Jesse Eisinger and Paul Kiel, who spread the billionaire’s tax avoidance story, in an email.
It is unclear how much taxes Musk paid in 2019 and 2020. His official salary was $ 23,760 in 2019, and zero in 2020, according to Tesla’s SEC filings.
The traditional effective tax rate, which compares taxes with income, “has real flaws in assessing the tax burden of the ultra-rich,” said Eisinger and Kiel. “The ultra-rich can control the time and place of their income and often keep it low. The advantage of this is that they can pay very low income taxes for years, even zero, like Musk did in 2018. ”
The ProPublica report did not include any state tax information. Musk said he paid California income tax in proportion to his salary and time spent there. That won’t be the case in the future, however, as he moved his residence and headquarters from Tesla to Texas earlier this year, which has no state corporate or income tax.