Tesla CEO, Elon Musk, may be setting a new record as he has said he will pay more than $11 billion in tax this year, which seems to be the highest amount payed by one individual.
Elon Musk said he would pay the unusually high tax bill this year, following the sale of millions of Tesla shares, after earlier being accused of paying zero federal taxes despite sitting on an estimated $243 billion. This is all following Senator Elizabeth Warren last week describing Musk as “the world’s richest freeloader”.
Musk has sold about $14bn worth of Tesla shares since early November, when he asked his Twitter followers whether he should sell 10% of his holdings. Almost 60% of his 67 million followers voted that he should sell the shares and the taxes on the sales are estimated to come in at between $11bn and $12bn.
Regardless of the outcome of the vote, Musk would have had to start selling down his 23% stake in Tesla since he was facing a huge tax penalty on share options that were given to him in 2012 and will expire in August 2022. He must pay tax on the gain in order for the options to be exercised. In the last ten years, Tesla stock has risen by more than 20,000 percent.
Tesla CEO Elon Musk’s taxes have been a contentious issue in the United States, because rather than receiving a taxable salary or bonus, his riches come from Tesla bonus share awards and the rise in the company’s stock price (income tax is only paid on share price gains when the shares are sold).
According to a recent New York Times article, Elon Musk paid no federal taxes in 2018. Between 2014 and 2018, Musk paid a “true tax rate” of 3.27 percent, according to a ProPublica report earlier this year. Warren, a progressive Democratic senator who has long pushed for tax reform measures in order to guarantee that the ultra-wealthy pay more taxes, last week criticized Time’s choice to name Musk its person of the year.
“Let’s change the rigged tax code so The Person of the Year will actually pay taxes and stop freeloading off everyone else,” she took to Twitter to explain.
Musk replied: “If you opened your eyes for 2 seconds, you would realize I will pay more taxes than any American in history this year.”
Since Musk’s announcement that he would be selling his shares, Tesla’s stock has decreased by about a quarter. They dropped by another 3% on Monday. The firm’s market capitalization has plummeted to just over $900 billion, down from the trillion-dollar valuation it achieved in October.
Guggenheim Partners analysts on Monday warned investors that electric vehicle manufacturing may fall short of expectations, and mentioned that they were afraid Tesla’s share price would be harmed as more rivals entered the electric and autonomous vehicle market at lower prices.
“We believe EV adoption may fall short of industry forecasts, particularly in the US due to a less onerous regulatory backdrop and limited product launches in key market segments,”
Ali Faghri, the Guggenheim analyst said.
“We also believe Tesla’s scarcity value from a stock perspective is waning, with significantly more EV and AV-focused companies going public over the last 12-18 months, giving investors more options at lower valuations to get exposure to secular growth in EVs and AVs.”