Here’s How Many Billions Of Dollars America’s 20 Richest—Including Elon Musk And Jeff Bezos—Might Owe Under Proposed Billionaire Tax

Here’s How Many Billions Of Dollars America’s 20 Richest—Including Elon Musk And Jeff Bezos—Might Owe Under Proposed Billionaire Tax

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Elon Reeve Musk FRS is an entrepreneur and business tycoon. He is the founder, CEO, and Chief Engineer at SpaceX; early-stage investor, CEO, and Product Designer of Tesla, Inc.; founder of The Boring Business; and co-founder of Neuralink and OpenAI.

Musk was born to a Canadian mother and a South African daddy and raised in Pretoria, South Africa. He briefly went to the University of Pretoria prior to relocating to Canada aged 17 to go to Queen’s University. He transferred to the University of Pennsylvania two years later on, where he received bachelor’s degrees in economics and physics. He moved to California in 1995 to go to Stanford University however decided instead to pursue a business profession, co-founding the web software company Zip2 with brother Kimbal. The start-up was acquired by Compaq for US$ 307 million in 1999. The very same year, Musk co-founded online bank, which merged with Confinity in 2000 to form PayPal. The business was purchased by eBay in 2002 for $1.5 billion.

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Here’s How Many Billions Of Dollars America’s 20 Richest—Including Elon Musk And Jeff Bezos—Might Owe Under Proposed Billionaire Tax – Wealthy and Growing

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On Monday, as Tesla shares surged—adding another $26 billion to Elon Musk‘s now $254 billion fortune—certain Democrats in Congress were working away on a proposed new tax on billionaires. Then, in the early hours of Wednesday morning, Senate Finance Committee Chairman Ron Wyden (D-OR), unveiled a 107-page plan that would extend the federal long term capital gains tax to include “unrealized gains” in publicly traded assets held by individuals with more than $1 billion in assets or $100 million in income for three consecutive years.

In the first year a billionaire became subject to the plan, all their unrealized (and therefore never-taxed) gains to date—not just the latest year’s gains—would be covered. Wyden’s proposal would take effect in 2022. But, to illustrate the magnitude of this tax, Forbes estimates that, had the tax first been put in place for 2020, the 20 richest billionaires on the Forbes 400 with mainly public stock fortunes—including Musk, Jeff Bezos, Mark Zuckerberg, Bill Gates and Warren Buffett—would theoretically owe $239 billion to the treasury.

The hardest hit in 2020 would be Bezos, owing $39.7 billion and then Zuckerberg, who would be on the hook for $19.9 billion. Wyden’s plan gives billionaires five years to cough up that first year net tax hit, allowing them to pay it out over five equal installments.

But this tax would keep on giving to Uncle Sam, particularly if the public stock market performed anything like it has between 2020 and 2021. Musk’s shares—as of the 2021 Forbes 400 valuation date of September 3—had gained $83 billion so far this year, which would mean another $20 billion tax hit for Tesla’s founder, for a combined $29.8 billion over the first two years. (By contrast, according to tax returns obtained by ProPublica, Musk only paid $455 million in income taxes between 2014 and 2018.)

In all, using the Forbes 400 2021 valuation date, our 20 billionaires would owe another $106 billion for 2021. (Again, that’s assuming the tax had taken effect in 2020, whereas it’s proposed to take effect in 2022.) So in just the first two years of the tax, these 20 billionaires could have owed $345 billion—about 19% of their collective current net worth of $1.8 trillion—assuming they didn’t take a big charitable out, written into the bill. That’s more than the $200 billion to $250 billion over ten years estimated by House Speaker Nancy Pelosi.

Not surprisingly, Musk was quick to denounce the new proposal, firing off several tweets attacking the plan on Monday. “Eventually, they run out of other people’s money and they come for you,” he wrote in response to a tweet opposing the tax.

Still, Wyden’s summary appears to leave billionaires several ways out of the tax—for example, transferring their appreciated stock to a charity before the tax was assessed at the end of that first year. And taxing only publicly traded assets annually leaves out hundreds of billionaires with stakes in or ownership of private companies. In fact, 56% of the 400 richest Americans—and 58% of the 778 U.S. billionaires tracked by Forbes—have largely private fortunes.

But Wyden hasn’t forgotten them. Instead, these non-publicly traded assets are taxed—with an extra “deferral recapture” charge—when they are sold, or certain transfers or gifts are made with them. Here’s (roughly) how that would work: the built in gain in these assets at the end of the first year the taxpayer was subject to the billionaire tax would be allocated to that year and then interest for all those years would be imposed on the amount of tax that would have been owed in the first year. The total interest would be capped—a bit. According to the proposal, in the year of sale, total capital gains tax, plus all the deferred interest, could not come to more than 49% of the gain.

Billionaires with non publicly traded assets would also have the option of paying gains on their built-in gains in the first year they became subject to the tax—an option they would presumably be unlikely to take if they believed a future Republican Congress would repeal the tax with a future Republican President signing that repeal. The relatively modest rate of interest (for tax geeks, it’s the short-term applicable federal rate, which for November is just 0.22% plus one percentage point, or a total of 1.22%) would also likely make them less likely to take this option.

Lesser billionaires would also get some significant relief—they could treat up to $1 billion of their holdings in a public company as if they were non-publicly traded assets, thus deferring gains tax on that lump of stock.

One big beneficiary of the deferral for non-publicly traded assets: Michael Bloomberg, a key Democratic donor whose $59 billion net worth makes him the richest American with a predominantly private company fortune, thanks to his 88% stake in financial information and media giant Bloomberg LP.

It wasn’t immediately clear whether cryptocurrencies would be treated as publicly traded assets (subject to the annual tax) or non-tradable ones, taxed only on sale or transfer, potentially exempting from the annual levy more than half the net worth of billionaires like Sam Bankman-Fried, who has built a $26.5 billion fortune in a few years and who took to Twitter to criticize the plan.

“If you don’t include crypto, that might even be a more significant problem than not including private assets,” says Philip Hackney, a tax law professor at the University of Pittsburgh.

According to David Gamage, a law professor at Indiana University who worked with Sen. Wyden on the proposal, some—but not all—cryptocurrencies will be included in the tax, though it’s still unclear which ones.

The proposal, backers insist, isn’t a wealth tax, which (they hope) makes it more resistant to possible constitutional challenges: It’s designed as an income tax applied on unrealized gains, calculated using mark-to-market accounting, which treats publicly traded assets as if they had been sold at the end of each year.

Another way billionaires could complicate the tax is by transferring their shares to limited liability companies or trusts that make it unclear who the beneficial owner is. “Wealthy individuals will be looking for tools to put their money into trusts that escape the mark-to-market system, and the government and the IRS will try to stay ahead of those games,” says Philip Hackney, a tax law professor at the University of Pittsburgh.

Wyden makes an effort to curb the use of trusts to avoid the tax—it separately imposes the tax on existing trusts that have at least $100 million in assets or $10 million in income for three consecutive years and treats a billionaire’s transfer of assets to certain trusts as a taxable sale. Charitable trusts are exempt from that transfer tax; split-interest trusts (where both charity and individuals are beneficiaries) are subject to special rules.

What about billionaires who pay all the tax on built-in gain on their publicly traded stock and then see the value of their stock tumble? Mortgage billionaire Daniel Gilbert and casino mogul Miriam Adelson saw the value of their shares in Rocket Companies and Las Vegas Sands, respectively, fall by $7.6 billion between 2020 and 2021. According to Wyden’s proposal, any capital loss they realized at the end of a year could be carried back to offset the gain from three previous years—meaning they might be able to file for big refunds.

Even among Democrats, Wyden’s proposal is controversial. Other Democrats are reportedly considering swapping the billionaire tax with a 3 percent “surtax” on individuals earning more than $5 million per year. Some prefer a previous plan, supported by President Joe Biden and excluded from the House’s tax-the-rich plan, that would have taxed unrealized gains—above a certain amount—at death. Under current law, all assets someone holds when they die are “stepped up” to their current market value, meaning any unrealized gains, even if they come to tens of billions of dollars, are never subject to income tax.

“Billionaires and mega-millionaires are able to largely escape the tax system in a way that causes enormous economic harm,” says Indiana University’s Gamage. “There are real problems with our tax system at the top, and this is a good start towards fixing them.”

Kerry Dolan, Matt Durot, Janet Novack and Chase Peterson-Withorn contributed reporting.

Elon Musk is a South African-born American business owner and business person who established in 1999 (which later on ended up being PayPal), SpaceX in 2002 and Tesla Motors in 2003. Musk became a multimillionaire in his late 20s whenever he sold his startup company, Zip2, to a department of Compaq Computers.

Is Elon Musk the wealthiest guy worldwide?

As of 2 p.m. EDT Tuesday, Musk is in first place, worth an approximated $255.2 billion. Bezos is number two wealthiest, at an estimated $194.1 billion. Arnault follows in the number 3 area, worth $185.2 billion, according to Forbes’ estimates.

Did Elon Musk originate from money?

Elon Musk was not born into wealth, unlike many fortunate businesspeople. He built himself up through his own developments and determination. There have been reports that Musk’s daddy was a rich, emerald mine-owning man, that isn’t true, and Musk has actually gained nothing from his dad.

What is Elon Musk IQ level?

While there are no main sources that have actually checked Musk, his IQ is usually estimated to be 155. Experts have based this on his possible to understand and use complicated technical data, his early aptitude tests, and how he utilizes his understanding to drive creativity in complex industries.

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