Tesla and SpaceX CEO Elon Musk is one of several megarich citizens who pay a small sum in income tax compared to the amount their wealth balloons each year, according to a report from the nonprofit news site ProPublica published Tuesday.
Over the period from 2014 to 2018 – as Musk’s wealth grew by $13.9 billion – he reported just $1.52 billion worth of taxable income to the Internal Revenue Service, ProPublica reported. If his $455 million in taxes paid are compared to his wealth gains, they equate to what ProPublica calls a “true tax rate” of 3.27%.
That “true tax rate” is less than a tenth of the 37% Musk would need to pay if his wealth was considered income. However, Musk’s gains in net worth come mainly from his massive stakes in SpaceX and Tesla, now the world’s most valuable carmaker. Musk receives a vast amount of stock awards from Tesla as compensation, but under the current federal tax code, he doesn’t need to pay any tax until those assets are sold, or capital gains are otherwise realized.
In 2018, Musk paid no federal income tax, the report said.
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The notion that high-net-worth individuals use the tax code to their advantage to pay minimal income tax is nothing new. But ProPublica’s reporting, which draws on more than 15 years of Internal Revenue Service data on thousands of the country’s wealthiest people, sheds light on exactly how much Musk and others fork over in taxes each year – and how much income they actually report.
ProPublica did not publish its source data or disclose how the information was obtained. Musk did not respond to questions from ProPublica, replying with only a “?,” the site reported.
The trove of information shows the investments, stock trades, income, and other key data points about the wealth of billionaires like Mark Zuckerberg, Bill Gates, and Rupert Murdoch.
ProPublica compared the amount that these billionaires paid in federal income tax to the amount that their net worth grew over a certain period to develop what it dubbed their “true tax rate.” In reality, taxes are paid based on earned income, which doesn’t include stock awards or the appreciation of investments.