As Democrats attempt to figure out how to pay for Joe Biden’s Build Back Better plan, one idea a number of lawmakers have coalesced around is a tax on the wealthiest people in the country, whose net worths begin with a b. Drafted by Senator Ron Wyden, the plan, released on Wednesday, would raise hundreds of billions of dollars from approximately 700 billionaires by requiring them to pay taxes on the increase in value of their publicly traded assets, like stocks and bonds. One of the many reasons the proposal is more than fair is because despite being the richest people in the country by a long shot, many billionaires often pay nothing in income taxes; unlike working stiffs who actually have to collect a paycheck, these people live off of the skyrocketing value of their assets, which, unlike income, is not taxed until said assets are sold. (The ultrarich are able to pay for stuff, while holding on to their extremely valuable stock and taking $1 salaries to further avoid taxes, by repeatedly taking out loans with single-digit interest rates that the IRS does not consider income, a process dubbed “buy, borrow, die.”) Which is how, for example, Elon Musk and Jeff Bezos, the richest people in the world, have been able to get away with paying zero dollars and zero cents in income taxes in some years, and, in the case of Musk, a laughable $68,000 in 2015 and $65,000 in 2017.
Given that Musk paid nothing in income taxes in 2018 and, as of yesterday, was worth $287 billion, you might think that he’d reflect on his situation and say, “You know what? This is fine. The tax won’t affect my life in any way whatsoever, but it would help millions of people who make less money over the course of their entire lives than I do in a single day. So go for it—make me pay my fair share.” But…surprise! Instead, he’s thrown a predictable hissy fit over the whole thing.
Tesla CEO Elon Musk on Monday evening criticized a Democratic tax proposal that would target American billionaires to fund a safety net expansion, saying it represented the start of a new campaign from Democrats to redistribute wealth from the richest Americans. “Eventually, they run out of other people’s money and then they come for you,” he wrote on Twitter. In a separate tweet, Musk said any government-induced reallocation of wealth would be better managed by the private sector. “Who is best at capital allocation — government or entrepreneurs — is indeed what it comes down to,” he wrote on Twitter. “The tricksters will conflate capital allocation with consumption.”
Musk’s initial tweet was in response to a template another user had posted with the suggestion that people send it to their senators or other members of Congress; the letter read, in part: “Although the proposal targets billionaires and not myself, the government of elected representatives have a track record of scope creep when writing new taxes. I anticipate that any new unrealized capital gains taxes will slowly make their way down to middle class retirement investments over the next several years. It will start with billionaires, then eventually millionaires, then the modest investments will get hit possibly within a decade.”
What we love about Musk’s endorsement of this idea is not just that, despite having more money than God, he can’t fathom the idea of having to cough up a little more cash than he currently does, but also that he has the audacity to try and convince middle-class people that Congress taxing his unfathomable wealth will ultimately hurt them.
Would Musk have to fork over a sizable chunk of change under the plan? According to The Washington Post, an analysis by an economist estimated that the Tesla founder could face up to $50 billion in taxes in the first five years of the tax’s implementation. But that number is significantly less scary than it sounds when you remember the guy’s net worth increased by $36 billion in a single day this week. So yeah, he can afford this and still have walking-around money left over.
Musk, of course, isn’t the only ridiculously rich person deeply concerned about the proposed tax. Per Politico:
The fine print of the billionaire tax being proposed by Senate Finance chair Ron Wyden (D-Ore.) has yet to be released, but Robert Willens is already getting calls about how to evade it. Not from one of the 700 or so people in the country with more than $1 billion in assets who would be affected by the tax, he says, but from some of the people who handle such matters for them. Willens is Wall Street’s go-to tax guy, the person hedge fund managers turn to for advice. He is said to charge clients $75,000 a year. [Politico] Nightly called him to see how he plans to counsel billionaire clients about how to avoid paying Wyden’s potential new tax. He said there’s not much he can tell them now: Tax avoidance is usually in the loopholes and gray areas and technicalities of such laws. But, he added, if Democrats manage to pass the tax and it survives an expected constitutional challenge, it would be hard for his ultra-wealthy clients to finagle their way out of it.
“This is going to be perhaps the most difficult tax we have ever seen in terms of trying to plan to minimize it,” said Willens, a former managing director at Lehman Brothers who has been working on taxes since the early 1970s. “I believe this is going to be the biggest challenge we have ever had.”
Willens said that the Supreme Court might be the best tax-avoidance strategy for the billionaire class. A legal challenge over whether the tax is covered by the income taxes permitted under the 16th Amendment is a certainty. One move that won’t work: leaving the country—or renouncing American citizenship. “You can be absolutely, 100% sure that there is going to be some sort of exit tax imposed,” Willens said. “I don’t see that as much of a strategy.”
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