Elon Musk regularly receives criticism from politicians and critics that he doesn’t pay his fair share of taxes. Some politicians, such as Senator Warren, routinely say that Elon paid $0 taxes in 2018. However, Elon Musk isn’t alone. Most of the billionaires in this country pay little to no income tax.
$0 Salary With a Caveat
Many Elon Musk supporters point out that he is a great CEO and leader because he doesn’t take any salary. Elon owns several companies — Tesla, SpaceX, Boring Company, Neuralink, (Twitter) — and takes a $0 salary. However, it’s primarily to avoid taxes.
Everyone, from minimum wage workers to high-paying executives, takes salaries. When someone earns a salary, they must pay federal, state, and local income tax. The combined tax could be up to 55% depending on income range, state, and locality.
To avoid these taxes, Elon takes no salary. However, Elon doesn’t work for free for these companies. He takes wages and benefits in company shares and stock options. According to federal regulation, one must pay income tax only when someone sells those stocks. Elon isn’t selling and holding all his portfolio, so he pays $0 income tax.
However, if a person doesn’t take a salary from his job, how will he afford his lifestyle? In the case of Elon, Tesla and SpaceX spend all the money for him.
Elon rides several private jets. Those jets are registered to either Tesla or SpaceX. Thus, Tesla and SpaceX bear all the costs related to those jets, such as purchase, maintenance, fuel, insurance, pilots’ salary, food, etc.
Moreover, there are several vehicles that Elon Musk and his family use. All the cost related to those vehicles also falls on Tesla and SpaceX. Therefore, Elon spends and needs $0 for his transportation.
A few years ago, Elon Musk famously sold off all his houses in California. He said that earthly possession keeps him from moving forward to a better future. Even though he moved from California to Texas, he didn’t buy any million-dollar homes there. Reportedly, he lives in a $50,000 house near Boca Chica, Texas. However, his housing costs are also paid by SpaceX and Tesla.
SpaceX owns the home where Elon Musk lives near Boca Chica. Thus, they paid for the property. They also pay property taxes and maintenance costs.
Elon also lives in several rented houses near Tesla headquarters. However, Tesla pays for those rental properties both in Texas and California. Thus, Elon needs to spend $0 for housing.
Even the food and recreational costs come from Tesla and SpaceX in the form of business spending.
Elon and his family members have health insurance through Tesla. That insurance has the most comprehensive health coverage imaginable. Thus, Elon and his family pay $0 out of pocket for their medical procedure.
Therefore, even though Elon Musk takes a $0 salary from his companies, all of his transportation, health insurance, and housing are paid by his companies.
Elon is one of the most well-known, famous, and influential people in the world. Thus his security and his family’s security are paramount. Elon and his family members are well protected by a private security force paid by SpaceX and Tesla.
Housing, health insurance, and transportation are the most significant cost factors for anyone. For Elon Musk, all these are taken care of by others.
Elon’s $11 Billion Tax Bill
In the 2021 tax year, Elon paid $11 billion in income tax. However, he made sure that everyone knew about it. He famously polled on Twitter whether he should sell Tesla shares to pay taxes to squash criticism that “Billionaires don’t pay a fair share of taxes.” Even though Elon framed the $11 billion tax-paying sagas as an act of goodwill, the reality is different.
Even though Elon doesn’t take any salary from SpaceX and Tesla, he receives a performance-based salary and bonuses in company stocks. In 2021, Elon was about to get more than $20 billion worth of Tesla stocks through option expertise. This option exercise triggered the $11 billion income tax burden. To fulfill it, he had to sell Tesla stock. Many don’t know, but Elon ended up having more Tesla shares after this sale.
The criticism that Elon paid $0 taxes in 2018 is genuine but disingenuous. It’s not a lie but deception by omitting the whole truth. In 2017, Elon overpaid his federal taxes due to a clerical error. Thus, during the 2018 tax season, he rolled his previous tax payment towards the 2018 tax. It’s why he paid $0 tax in 2018.
All Billionaires and Companies are Alike
Elon isn’t alone. Most billionaires like Mike Bloomberg, Jeff Bezos, Warren Buffet, company CEO and executives, and companies like Amazon, Apple, and Facebook don’t pay federal taxes even though they do trillion-dollar business.
For example, Apple, Facebook, Tesla, and other companies never bring their offshore revenue to America. They register shell companies outside America and roll those revenues to those companies. They also keep all the profits in offshore bank accounts. Thus, the US Federal government can’t take any taxes.
These companies also apply another tax-avoiding strategy. Most international companies are registered in tax haven countries. If, for example, Apple needs to invest, they will loan it from that offshore company. Even though Apple has set up that offshore company, the Federal government is bound to give Apple a tax break due to various rules and regulations. For example, it’s why even though Facebook earns billions of dollars in ad revenue, still due to the tax loophole, they can claim that they are a money-losing business.
One doesn’t need billions of dollars to lead a healthy, happy, and frugal life. When housing, health, and transportation costs are met, all other expenses are minimal. Only a few million dollars are enough. In the case of Elon Musk, all of his amenities are paid for by Tesla and SpaceX. Thus, he takes a $0 salary and pays $0 taxes.