For the uninitiated: Musk, like many ultra-wealthy corporate bosses, doesn’t get paid like normal people. When you see the headlines about his net worth exceeding $ 300 billion, it’s fun to imagine him diving into a vault of gold coins, a la Scrooge McDuck. But that staggering number refers primarily to Musk’s equity stake in Tesla, his trillion-dollar electric vehicle company.
In fact, Musk rarely misses an opportunity to remind us that he doesn’t accept a cash salary or a bonus. “I only have shares, so the only way to pay taxes personally is by selling shares,” he tweeted over the weekend.
Of course, everyone has to eat. So how is a billionaire supposed to get a bagel and a cup of coffee these days? Or … a yacht?
Credit, above all. Musk and other super-rich people borrow substantially from banks, using their shares or other assets as collateral.
Fundamentally, those bank loans are not taxed in the way that regular income would. If you’re Elon Musk, you can go to the bank and say, “I need $ 10 million because I want to fill a vault with coins and swim in it.” Or buy a helicopter. Or do whatever eccentric rich person activity you like.
The bank will pay it off with a smile and give you a good deal, say 3% interest. But if Musk got that $ 10 million from the sale of Tesla stock, he would likely be subject to capital gains tax, at a rate of about 20%. Also, a CEO can’t just sell stock anytime he wants; when they do, it is usually a sign of trouble and that can cause investors to panic. Musk’s mere suggestion of a stock sale, that he have Doing because of his option package sent Tesla’s stock price down nearly 5% on Monday.
Well, Musk doesn’t see it that way, which is why he’s been attacking the Democrats’ proposal for a multi-million dollar tax to help pay for President Joe Biden’s massive social spending plan. And so far he’s getting away with it: The multi-million dollar tax argument was finally dropped from the spending bill that Congress passed late last week.
About that tweet …
The Twitter charade over the weekend left analysts scratching their heads. “Taking a poll on Twitter to sell 10% of your shares is another strange soap opera that can only happen to one company and one CEO in the world,” wrote Daniel Ives, senior stock research analyst at Wedbush Securities, in a note to customers.
In a cryptic message Saturday, Musk proposed to sell 10% of his stake in Tesla, currently valued at around $ 20 billion, as if it hadn’t occurred to him to do so before the Democrats’ billionaire tax became part. of the national conversation.
In fact, Musk has known for most of the last decade that he would need to sell these shares before August 2022. As part of his complex compensation package, Musk has more than 20 million stock options that expire next year.
– Chris Isidore of CNN Business contributed to this article.