Should the richest man in the world pay taxes?

Elon Musk could sell about 17 million Tesla shares because his Twitter fans want it that way. The billionaire is responding to the debate about a billionaire tax - and the stocks market price.

Tesla boss Musk asked his followers on Twitter whether he should sell 10 percent of his shares in the electric car manufacturer. "There has been a lot of talk lately about unrealised profits as a means of tax avoidance," Musk wrote on Saturday evening. Therefore, I suggest selling 10 percent of my Tesla shares. The tweet contained a survey that set "yes" and "no" as answers and is scheduled for 24 hours to 8 p.m. Central European time.

"I will stick to the results of this survey, no matter how it ends," Musk wrote. Since he does not receive cash salary or bonuses, selling shares is the only way for him to become taxable. He has also separated himself from his real estate(s) some time ago.

By Sunday morning, the survey received more than 2.8 million votes. Initially, almost 57 percent of the participants were in favour of a sale. Musk has 62.5 million Twitter followers. The owner of the companies such as SpaceX and Neuralink held on the June 30th about 170.5 million Tesla shares. According to calculations by the Reuters news agency, taking into account Friday's share price, he would raise almost 21 billion dollars by selling one tenth of it.

At a tax rate of 37 percent, the state would then be entitled to more than seven billion dollars. As a new citizen of Texas, Musk would only have to pay federal tax, because Texas, as one of a few US states, does not levy its own additional income tax. Musk's previous residence in California is subject to a top rate of 12.5 percent, which according to the billionaire also applies retroactively to claims acquired before his move and is “significant".

According to Bloomberg Billionaires Index, Musk's assets have doubled to $338 billion since the beginning of the year, mainly thanks to the Tesla rally. He leads the ranking far ahead of Amazon founder Jeff Bezos. Musk himself has repeatedly characterised the rise in price as insane, but also cheered on it on other occasions.

Several other members of the Tesla board used the latest high prices to make cash. According to a mandatory announcement, his brother Kimbal Musk sold 15 percent of his shares on Friday, earning more than $100 million.

According to many analysts, Elon Musk may have to sell a larger number of shares anyway to pay taxes on options that expire next year. The Tesla boss himself warned in September that he was threatened with a "massive" tax burden this year. According to the company, the company boss has a August 2022 expiring option to buy 22.86 million shares at a unit price of 6.24 dollars. Musk said he probably had to pay more than half of the profits he makes when exercising the options.

Price gains of shares are only taxed in the USA when the securities are sold and thus a profit is realised. This is considered one reason why US corporations like to buy back their own shares - and thus support the price - instead of paying the money as dividends. Critics complain that rich citizens can build up a fortune without having to pay taxes. Some super-rich people like Musk also make a living from the increase in wealth by using their shares or options as collateral for loans. This does not generate taxable income. The "Propublica" platform revealed data from the US tax authority IRS in June, according to which Elon Musk's effective tax rate for the years 2014 to 2018 was only 3.3 percent. This includes years like 2018 in which Musk sold zero to the federal government, as well as in 2016, when a maturity date for stock options triggered a larger tax burden.

In the course of President Joe Biden's planned tax reforms, this is under discussion to change this. In Congress, a so-called "billionaire tax" of 23.8 percent on profits on securities is discussed in concrete terms, whether they were realised through a sale or not. About 700 taxpayers in the USA who own assets of more than one billion dollars or have 100 million dollars as annual income for three consecutive years would be affected. The money collected in this way is intended to help finance Biden's planned social and climate reforms. Musk criticised the considerations. After a short phase in which the billionaire tax was considered as a possible solution to a blockade in Congress, the project is once again considered politically failed.