Elon Musk doesn't get paid, buy stuff or pay taxes like you do

For the uninitiated: Musk, like many ultra-wealthy heads of corporations, would not obtain a paycheck like common folks. When you see headlines about his internet price topping $300 billion, it is enjoyable to think about him diving right into a vault of gold cash, a la Scrooge McDuck. But that eye-popping quantity refers principally to Musk’s fairness stake in Tesla, his trillion-dollar electrical car firm.

In reality, Musk not often misses an opportunity to remind us that he doesn’t take a money wage or bonus. “I only have stock, thus the only way for me to pay taxes personally is to sell stock,” he tweeted over the weekend.

Of course, everybody one’s gotta eat. So how’s a gazillionaire alleged to get a bagel and cup of espresso lately? Or … a yacht?

Credit, principally. Musk and different uber-wealthy of us borrow considerably from banks, utilizing their inventory or different belongings as collateral.

In August, a Tesla submitting revealed that some 88 million of Musk’s Tesla shares have been pledged as collateral “to secure certain personal indebtedness.” At the time, these shares have been worth $63 billion.

Tax loophole

Critically, these financial institution loans aren’t taxed the best way common revenue could be. If you are Elon Musk, you may go to the financial institution and say, “I need $10 million because I want to fill a vault with coins and swim in it.” Or purchase a helicopter. Or do no matter eccentric rich-person exercise you are into.

Tesla shares slide after Elon Musk asks Twitter if he should sell

The financial institution will fork that over with a smile and offer you a extremely whole lot, say 3% curiosity. But if Musk bought that $10 million from promoting Tesla inventory, it might be seemingly be topic to capital beneficial properties tax, at a price of about 20%. Plus, a CEO cannot simply promote inventory anytime they need — after they do, it is normally an indication of bother, and that may trigger buyers to panic. Musk’s mere suggestion of a inventory sale, which he has to make due to his choices package deal, despatched Tesla’s inventory worth down almost 5% on Monday.

This borrowing setup is partly why Musk, in addition to Amazon founder Jeff Bezos, the 2 richest folks on the planet, have paid little or no income tax lately, based on an investigation by ProPublica.

Infuriating, proper?

Well, Musk would not see it that means, which is why he is been attacking Democrats’ proposal for a billionaire tax to assist pay for President Joe Biden’s huge social spending plan. And to this point he is getting his means — the billionaire tax pitch was finally dropped from the spending invoice Congress accepted late final week.

About that tweet…

The Twitter charade over the weekend left analysts scratching their heads. “Holding a Twitter poll to sell 10% of his stock is another bizarre soap opera that can only happen to one company and one CEO in the world,” wrote Daniel Ives, senior fairness analysis analyst at Wedbush Securities, in a word to shoppers.

In a cryptic message Saturday, Musk proposed promoting 10% of his Tesla stake — at the moment valued at round $20 billion — as if it had not occurred to him to take action earlier than the Democrats’ billionaire tax turned a part of the nationwide dialog.

In reality, Musk has recognized for the higher a part of the previous decade that he would wish to promote these shares earlier than August 2022. As a part of his advanced compensation package deal, Musk has greater than 20 million inventory choices that expire subsequent yr.

To marvel why Musk tweets what he does is to ponder chaos. His musings on the platform repeatedly inflate or deflate no matter pet inventory or crypto he is on about. And whereas he’s technically below orders from the Securities and Exchange Commission to have his tweets vetted by Tesla’s high authorized brass, it isn’t clear that is taking place. He repeatedly tweets market-moving feedback, and final yr, based on the Wall Street Journal, regulators advised Tesla that his use of Twitter had twice violated the deal, however it wasn’t clear whether or not they would take motion towards Musk or the corporate.

— CNN Business’ Chris Isidore contributed to this text.

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