Science

Elon Musk takes us for idiots with his tax melodrama

The Tesla boss has started selling Tesla stock, as he promised when he surveyed Twitter members on the subject. If Elon Musk makes Internet users think who encouraged him to make this decision to pay more taxes, the reality is much more prosaic.

Elon Musk is a communication professional, we know, but the melodrama he’s playing us right now about taxes may be his best sleight of hand. The Tesla CEO has sold $ 6.9 billion in shares of his company in recent days, says CNBC. However, this action does not come out of nowhere. It follows a poll the billionaire took on Twitter on November 6, in which he asked internet users to comment on how he manages his Tesla shares and paying his taxes.

Today, the richest man in the world, with a wealth of more than 220,000 million dollars, pays relatively little in taxes, since most of his fortune is backed by his shares in the companies he created (Tesla, SpaceX , etc.). Therefore, it is mainly taxed on capital gains derived from the acquisition or disposal of its shares. Apart from these cases, goodwill is said to be “latent”.

Make a billionaire pay more taxes

“A lot of people right now believe that unrealized capital gains are a form of tax evasion, so I’m offering to sell 10% of my Tesla stock. Do you support my proposal? Elon Musk tweeted on November 6, accompanying his post with a “poll” on Twitter. The CEO of Tesla has clarified that he will follow the direction given by the voters, whatever that may be.

Liked and commented profusely, Elon Musk’s poll garnered no less than 3.5 million responses at the time of counting. It is true that it is exhilarating to think that one can encourage a billionaire to pay more taxes with a simple click. The choice that Elon Musk offered Internet users is, however, more illusory than anything else. Unsurprisingly, a majority of people voted “Yes” in the Twitter poll, encouraging Elon Musk to sell 10% of his Tesla shares to pay taxes.

But it was highly likely that Elon Musk would sell some of his Tesla stock in the next few months anyway. As CNBC explains, there are many call options in Elon Musk’s compensation package that will expire in August 2022. These options allow you to buy Tesla stock at a fixed price ($ 6.24) that is now significantly lower than the actual price. of a Tesla share ($ 1,033 as of this writing).

Source: Nino Barbey for Numerama

A hefty tax bill to come

When Elon Musk uses these options, he will generate acquisition profits that will be taxed. CNBC estimates that the tax bill hanging in the billionaire’s face is around $ 15 billion. To pay it off, Elon Musk could possibly borrow. He already has several, backed by Tesla shares. But this option has its drawbacks. The Tesla company noted, for example, in the third quarter of 2021: “If the price of our shares decreased significantly, Mr. Musk could be forced by one or more banking institutions to sell Tesla shares to meet obligations related to your loan, s’ could not do it in other ways. These sales could further reduce the value of the shares. “

Therefore, Elon Musk was likely not to get a new loan, but instead chose to sell shares to have the cash to pay his taxes. Therefore, we are quite far from the scene of a generous billionaire, who agrees to pay more taxes at the request of the people. In the end, these are just mundane financial decisions, which many others would have made as well, without having seen fit to shout it out on Twitter.

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Photo credit of the one:
Flickr / Steve Jurvetson

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