Tax rates need urgent reform – an $11bn bill is small change to Elon Musk

Compared to Musk’s overall wealth – estimated at $243bn – this year’s payment represents a very small drop in a very large ocean

‘It’s thanks, largely, to Tesla and its army of fanboys that Musk is currently the world’s richest man’ (Getty Images)

“For those wondering, I will pay over $11bn in taxes this year” tweeted Elon Musk, and well, someone call the Holy See. This man should be canonised. And hit up the Nobel Committee too. Surely it can find a way to confer one of its awards on Elon?

Why not just give him the lot of ‘em? A Time Magazine Person of the Year gong while we’re at it? What’s that? He’s already been given one? Same goes for Stalin. And Hitler. But also Greta and Dr King. Count it as a mixed blessing, then. But his pouring $11bn into the US Treasury surely makes it worth it, before we get onto the other stuff like building electric cars and spaceships and whatnot.

At this point, I think we need to track back a bit. Elon’s tweet came in response to another tweet from Senator Elizabeth Warren (seriously, what do these people do all day?). Warren is one of those Democrats who hasn’t forgotten that to win you have to “get down in the mud with the f***indg elephants,” as Tom Duffy, Paul Giamatti’s cynical campaign manager, memorably put it in the political thriller The Ides of March.

The same goes when it comes to butting heads with billionaires like Musk, to whom she was referring when she tweeted: “Let’s change the rigged tax code so The Person of the Year will actually pay taxes and stop freeloading off everyone else.” His $11bn answer might appear to have won him the exchange. However, there are a few salient points to consider.

Sure, it’s a big sum of money, but first off, let’s stop any patting of Musk’s back. He’s only doing what every American has to do to stop the country falling apart. That’s what paying your tax does. It’s even less worthy of celebration when you consider that Musk’s blockbuster payment is actually an example of skilful tax planning.

A short while back, he held a public vote among his army of Twitter followers on whether he should sell a job lot of shares in Tesla, the $1 trillion electronic car company he controls and runs. It’s thanks, largely, to Tesla and its army of fanboys that Musk is currently the world’s richest man.

However, most of his wealth is tied up in stock. He only pays tax on that if and when he sells, crystallising a taxable gain in the process. Twitter, of course, to him to sell, and Musk proved as good as his word. But here’s the thing. It didn’t necessarily look that way at the time, but the result of the vote was perhaps the one he wanted.

Why? He would probably have had to start to sell down his holdings regardless. You see, Musk was awarded a bunch of share options in 2012, which are due to expire in 2022. To exercise, and profit from the options, requires the realisation of a taxable gain. And it’s quite the gain when you consider that Tesla’s shares have jumped like LeBron James in zero gravity over the last ten years (20,000 per cent plus).

“Elon Musk faces a $15bn tax bill, which is likely the real reason he’s selling stock,” said CNBC last month by way of explanation.  Well yes, his defenders would say, but he’s a great entrepreneur. Shouldn’t we celebrate that?

Is Time Magazine not doing that? Is his bank balance not doing that? He’s also a great salesman. Congratulations! And a top rank troll too. Which is a deal less praiseworthy. He has, in fact, taken to calling Warren “Karen”. However, I doubt she’ll be overly concerned about that, given she handled the worst Donald Trump could spew out with aplomb.

Anyway, back to the tax. And here’s another thing about that $11bn he says he’s paying this year. Yes, entrepreneurialism is great. The tricks some entrepreneurs use to avoid paying tax, not so much. A system that basically makes paying tax optional, even less so.

Compared to Musk’s overall wealth – estimated at $243bn – this year’s payment represents a very small drop in a very large ocean. It amounts to just 4 per cent of it. Let’s say he owned a sweet shop. It would be the equivalent of handing the taxman a pack of Chewitts and a Cadbury Creme Egg and sending him on his way.

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I could go on to talk about the tax breaks big companies like Tesla are commonly handed, or the impending move to Texas, a state which shamelessly tramples on a woman’s right to choose and allows psychopaths to waltz around with assault rifles. It has also been doing its level best to deny the franchise to African Americans, other minorities, or anyone looking like they might be a Democrat. What it doesn’t do, in contrast to California, is levy a state income tax.

The upshot is that the $11bn Musk seems to think invalidates Warren’s argument? It could actually be said to enhance it, because that figure is such small potatoes. The US tax code, and tax codes across the world, urgently need to be reformed so people like Elon Musk pay their share. A fair portion of the vast wealth they’ve amassed ought to go towards funding schools, building roads and bridges, treating the sick and helping to feed the hungry. Or to upholding the law, paying for the military and paying down debt. Take your pick.

The best of it is, Musk would still be able to enjoy his self-indulgent space jaunts if that happened, as would Amazon’s Jeff Bezos and the rest of them.