Musk Wants to Eliminate the Tax Schemes of Billionaires and Millionaires

Tesla's CEO and the world's second richest man says he pays more than his fair share of taxes.

Elon Musk is the second richest man in the world. A few weeks ago he even held the world's largest fortune. 

The Tesla  (TSLA) - Get Free Report CEO is also, along with Amazon  (AMZN) - Get Free Report founder Jeff Bezos, the symbol of tax inequality, according to progressives, in their campaign to make the rich pay more taxes.

The powerful Senators Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) continue to accuse the wealthy of using loopholes in the tax system to avoid paying taxes.

"Elon Musk didn't make it on his own. He got huge investments from the government, from taxpayers, from those public-school teachers and those minimum-wage workers who have been paying their taxes all along," Warren said in March 2022, in response to a question about her criticism of Musk. 

"All we're saying is that when you make it to the top, pay something in, so everybody else gets a share," she said. 

Musk, with a net worth of $169 billion as of March 18, according to the Bloomberg Billionaires Index, has consistently dismissed criticism about paying enough taxes.

"For those wondering, I will pay over $11 billion in taxes this year," the techno king announced on Twitter in December 2021.

Biden Wants the Rich to Pay More

The subject of taxes remains sensitive for Musk. It is no surprise that he has just responded to a post on Twitter from President Joe Biden, who plans to make the rich pay more. In his message, the Democratic president said that the rich must pay a minimum of 25%.

"Look, I think you should be able to be a billionaire if you can earn it, but just pay your fair share," Biden posted on Twitter on March 15. "I think you ought to pay a minimum tax of 25%. It’s about basic fairness."

The president accompanied his tweet with statements he's made before, including: "You know the average tax billionaires pay? THREE PERCENT. No billionaire should be paying a lower tax than somebody working as a schoolteacher or a firefighter."

According to Politifact, the 25 highest-earning billionaires paid an average tax rate of 16%. Per Politifact, "among households earning from $50,000 to $100,000 a year — the category that many teachers and firefighters would fall into — the vast majority paid effective tax rates of between 0% and 15%."

Musk Wants to Get Rid of GRATs

Musk estimates that he pays much more than the 16% and lets Biden know by commenting on the President's message. He even goes further, by saying that he is the person paying the most taxes in the world.

"I paid 53% taxes on my Tesla stock options (40% Federal & 13% state), so I must be lifting the average!" the billionaire quipped. "I also paid more income tax than anyone ever in the history of Earth for 2021 and will do that again in 2022."

Most surprisingly, Musk goes even further. He said that he agrees with Biden that everyone should pay their fair share of taxes and added that he is opposed to the schemes used, albeit legal, by the wealthy to avoid paying a lot of taxes.

"I certainly agree that everyone should pay taxes and not engage in elaborate tax-avoidance schemes," the serial entrepreneur said. "Would be curious to hear how these other 'billionaires' are so good at avoiding taxes!"

Musk goes even further and advocates the removal of a vehicle used by the rich to pass their wealth on to their heirs significantly reducing the taxes they have to pay. These are the Grantor Retained Annuity Trusts (GRATs). Musk adds that other similar legal mechanisms should also be eliminated.

"We should get rid of GRATs, but maybe other things too," the billionaire advocated.

GRAT is a financial mechanism where you deposit funds or assets such as stocks into an account, which pays out regularly in equal installments. The payments can be immediate or later in the future.

It is an irrevocable financial instrument for estate planning that minimizes taxes on large financial gifts to family members.