By Chris Isidore, CNN Business
Senator Elizabeth Warren and Tesla CEO Elon Musk are in the midst of an all-out war on Twitter. Warren calls the richest man in the world a bum for paying $0 in income taxes in recent years. Musk responded with a series of personal attacks, calling Warren “Senator KarenAnd claims his income tax bill is about to be the largest in US history.
He may be right – at least regarding his 2021 tax bill.
Warren calls Musk
Warren has long advocated raising taxes on the rich by taxing the wealth of the richest Americans, rather than just their income. After Musk was named Time Magazine Person of the YearWarren complains that he should pay more taxes.
“Let’s change the fraudulent tax code so that Person of the Year will actually pay taxes and stop causing trouble for others,” she said. tweeted Tuesday.
Musk, who has never shied away from the fight on Twitter, responded with a string of insults.
“You remind me of when I was a kid and my friend’s angry mother would just randomly yell at people for no reason,” he said in one. tweet.
According to Forbes estimates, Musk is worth $251 billion. But an investigation of ProPublica reported that in 2018 he and other billionaires paid zero taxes. That year, he had very little taxable income, because he sold none of his shares and received no salary or money. reward.
Why Musk will pay at least $7.6 billion in taxes this year
But Musk will face a Big tax bill this year — a fact he pointed out in another Twitter response to Warren.
“And if you open your eyes for two seconds, you realize that I’ll pay more taxes than any other American in history this year,” he said. he tweeted.
Musk has exercise stock options he was granted as his compensation in 2012, the options were made when Tesla hit a number of prearranged financial and operating goals over the following six years. Those options expire next year. If he doesn’t make them by August, he loses them.
While Musk has yet to pay taxes on their value, he will soon – and the tax bill will be substantial.
That’s because once he exercises those options, the value of the shares he buys, minus the actual nominal price of $6.24 per share, counts as earnings. And his bill on that stock will be at the top federal income tax rate of 37%, plus another 3.8% net investment tax, plus some unspecified state income tax. determined.
Musk can wait until next year to exercise these options. But if Democrats can get through Better invoice rebuild, it could significantly increase his federal tax bill. While passage of the bill is by no means certain, it would increase the tax rate on the types of transactions Musk makes — perhaps eight percentage points above what he currently pays. That’s probably why he made the options earlier than he needed.
To date, Musk has exercised nearly 15 million of the 22.9 million expiring options. And the value of that new stock is about $15.8 billion, which means he faces a $6.4 billion federal tax bill. He sold 6.5 million of those newly acquired shares to pay with option withholding, according to filings he made with the Securities and Exchange Commission on his stock transactions. .
He’s been exercising and selling stock every week since early November, and he’ll likely exercise at least another 4 million, if not more, before the end of the year. That could increase his 2020 tax bill by almost $2 billion.
Last month, Musk also sold 5.4 million shares he believes he holds, most of which he has held since his 2010 IPO. taxed at a lower long-term capital gain rate of 20%, so he would face an additional federal tax bill of about $1.2 billion more on those sales.
So his federal tax bill through 2021 is $7.6 billion, which could potentially grow to nearly $10 billion or more by the end of the year.
The wealth tax will cost Musk – if it passes
Musk’s net worth comes primarily from his stake in Tesla, although the value of the shares he holds in his other company, privately held SpaceX, is also substantial. . Over the years, both companies benefit substantially from US taxpayer support, with Tesla receiving at least $6 billion from various tax credits on its electric vehicles, and SpaceX signing about $10 billion worth of government contracts.
Warren proposed property tax law Early this year, there will be a 2% tax on the net worth of individuals and trusts valued at more than $50 million and less than $1 billion, and 3% on holdings of $1 billion or more. go up.
Musk, as the richest man, could face a $7.5 billion tax bill if that proposal passes, even if he doesn’t trade any stocks next year, with present value of the shares he holds. And Tesla stock has risen more than any other company in the past two years, meaning he could pay more if it continues to increase in value. But that law has yet to be passed.
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https://kesq.com/news/2021/12/15/elon-musk-calls-elizabeth-warren-senator-karen-in-fight-over-taxes-2/ Elon Musk Calls Elizabeth Warren ‘Senator Karen’ During Tax War