Elon musk is the richest man on earth but he’s still forced to do some things.
Lately, he sought advice from his millions of followers on Twitter on what to do with his wealth through a poll. however, is there another reason musk is passing ways with a big portion of his fortune? join us as we dig into how president joe Biden is forcing Elon musk to sell his Tesla stocks.
Asking Twitter for stock advice, it’s simply reckless, right? well by musk’s standard who has done crazier things in the past it’s not. musk set up a poll on what he should do with his wealth, and millions of people voted for him to sell the poll was dead simple with either yes or no and more than 3.5 million people participated
It’s easy to vote yes when it’s not your wealth but musk promised to abide by the poll result now apart from 58 percent of voters a clear majority clicking on yes musk has other reasons why he needs to shed some of his stocks which we will get into in this article. But first, how did musk end up with so much money a bit of a correction here though musk does not have lots of cash lying around in fact among billionaires, he is the most broke although being broke here is not in the same sense as the common person musk’s enormous wealth comes mainly from his stock in tesla.
Of which he owns about 17 in addition to 92 billion dollars worth of stock options that allow him to buy more shares at a steep discount he also owns part of SpaceX which makes rockets and puts satellites in space for
providing internet services in remote areas musk was awarded the stock options in 2012 as part of a compensation plan the award was for 22.8 million shares at a strike price of 6.24 per share Tesla shares closed at 1222.09 on the 5th of November meaning his gain on the shares totals just under 28 billion dollars unlike most CEOs, Musk does not earn a salary from either tesla or SpaceX the money he spends personally comes when he sells his stocks there is something else about the stocks musk owns he has used them as collateral for loans for tesla.
Which has helped the company to expand its production significantly tesla has been repaying these loans but they all have to be paid back at a point. Speaking about the loan collaterals musk explained the significant risk he is exposed to personally he says borrowing against the stock is all sort of fun and games until you have a recession and you hit the margin calls and then you go to zero which happens every time there is a recession they’re trying to make it sound like I was paying very low taxes but in fact, my taxes are very high.
Elon musk-like other billionaires have been criticized for the exponential increasing net worth even during or especially during the covid 19 pandemics while others struggled but there is hardly anything he can do about it since it is the stock market in action one singular event that has contributed to the sky-high valuation of musk’s worth before this event he and jeff Bezos his arch-rival on many fronts pass the title of the richest person between them however musk is now clear of his rival in the wealthiest person letter the event was when hertz announced a 100000 model 3 deals with tesla remarkably Hertz did not get any discount and had to pay the full price indicating Tesla had a strong position during the
negotiation and could walk away from the deal musk even stated that the agreement did not affect their financial situation as there was no shortage of buyers for Tesla cars.
That shot tesla stock price to the sky the stock market went into a frenzy of the news and rushed tesla shares the surge shot up tesla’s market capitalization to more than one trillion dollars the only automobile company in history to do so as Tesla shares rose in value so did musk’s net worth becoming the only human in recorded history to be worth more than 300 billion dollars one the claim that has always hung around musk and most other billionaires is that he doesn’t pay tax unlike the common working people
That is far from the truth as explained by musk himself in a tweet “note I do not take a cash salary or bonus from anywhere I only have stock thus the only way for me to pay taxes personally is to sell the stock” so no musk does not earn a salary for the IRS to tax but the IRS waits for musk to sell his stocks before taking a cut for the federal government that cut is massive by all standards and will make non-billionaires weep more than half of the revenue from the stock sale would end up in the government’s coffers at different levels here is how the taxation breaks down when musk sells his shares since the options are taxed as an employee benefit or compensation they will be taxed at top ordinary income
Levels or 37 plus the 3.8 net investment tax but that is not all as the state of California is also getting its share Musk will also have to pay the 13.3 top the tax rate in California since the options were granted and mostly earned while he was a California tax resident combined the state or federal taxes will be 54.1 percent so the total tax bill on his options the current price would be 15 billion dollars. Imagine handing over 15 billion dollars from your fortune to the government now apart from the Twitter poll which has compelled musk to sell what other reasons does musk have to dispose of some of his stocks?
The second reason goes back to his compensation plan the stock options he has are going to expire soon if he does not sell or do anything about them musk will lose the stock options this is why the federal government in California are about to cash in big-time musk himself said a huge amount will be paid in the next three months because of the expiring options how huge is this amount musk said the majority of his sold stocks would go into taxes which tallies with our calculation above Robert frank the CNBC wealth reporter analyzed musk’s stock situation as musk will sell his shares regardless of the result of the Twitter poll
But it was nice to see him give his Twitter fans the chance to feel they could decide what happened to his wealth so Basically, you shouldn’t take the result of musk’s poll seriously there is however another huge reason the musk would want to sell his shares it is severe enough to create a gaping hole in his wealth portfolio the Democrats are proposing a billionaire the tax that targets people like musk has his reasons to feel targeted there is no doubt the president is not a big fan of tesla
And it even extends to musk’s other company SpaceX president Biden left out tesla from a meeting of electric vehicle makers in the country choosing to side with only companies that use union labor even when they are not the best EV makers he build back the better program also cuts tesla from benefiting from the federal level incentive increment because musk won’t accept unions at his factories more pointedly the president didn’t seem it fit to congratulate SpaceX when it completed the feat of sending its first tourist astronauts to space and raised hundreds of millions of dollars for charity now the president’s party wants to create a special tax for billionaires to help it pay for its programs
Which according to musk is a thinly veiled attempt to redistribute wealth in the country a role not intended for the government if at all that should happen musk believes the private sector would better manage the reallocation of wealth he wrote on Twitter who is best at capital allocation government or entrepreneurs are indeed what it comes down to the tricksters will conflate capital allocation with consumption the democratic party has admitted as much claiming they are moving to tilt the economic scale of wealth away from the richest people and towards the middle class after years of growing inequality the new tax affects people worth more than one billion dollars or have consecutively earned more than 100 million dollars for three years.
Nowhere is the kicker if the democrats have their way a new analysis conducted by economist Gabriel Zuckerman for the Washington Post indicated the musk could face up to 50 billion dollars in taxes in the first five-year stretch of the tax implementation just like that another 50 billion of his wealth would go after muskets paid 15 billion in taxes for non-billionaires that feel is not their business musk has this warning on his Twitter when
“The government is done taxing the billionaires they will come for everybody else”.
You May Love: How Neuralink Will Change Humanity Forever