Over the weekend, online personality, self-described “edge lord,” and richest person alive Elon Musk taunted Americans on Twitter in response to a Democratic proposal that would tax unrealized gains for the obscenely wealthy. The billionaire lamented that, because of his meager salary, in order to pay his tax bill under the billionaires income tax he would be forced to sell some of his hundreds of billions of dollars of stock.
Musk’s public pouting about his lack of earned income brings up a very interesting question – how is it that the wealthiest man in the world and his ultra-rich peers are able to grow their wealth exponentially while paying almost nothing in taxes?
The answer is simple: billionaires play by a different set of rules than normal people. The way the government treats Elon Musk’s earnings is fundamentally different from the way it treats the income of the average American worker. The current tax code allows millionaires and billionaires like Musk to drastically increase their wealth, and consequently use their inconceivable amount of assets to fund their lavish lifestyles, virtually tax-free.
Billionaires and multi-millionaires aren’t “just like you, only rich,” but exist on an entirely different playing field than normal folks. They get to play by a different set of rules than workers, and it’s far past time that they be held accountable in the way of giving back to the society that makes them rich.
While the rich often take only a small salary (or none at all) from their jobs, that doesn’t mean they’re not earning anything. Instead of a salary, the truly rich often make their money through ownership of assets and the payouts that those assets offer them. Elon Musk may not take a salary from Tesla, but that does NOT mean he is not compensated by the company.
Musk’s crocodile tears over his wealth not being real and only existing in some tied-up stake is a farce meant to portray him as “just another guy.” His attempt to seem relatable is nothing more than a ploy to hide just how much preferential treatment he and his peers receive from the government.
The way that the rich accumulate wealth is almost exclusively through returns on their investments, also called capital gains, which are taxed at a special (i.e. lower) rate than ordinary income. Most Americans, on the other hand, go to work, receive a paycheck, and pay significantly more in taxes because they’re earning ordinary income instead of capital gains. Not surprisingly, most people earning investment income are already wealthy, meaning this two-tiered system overwhelmingly benefits rich people.
Make no mistake: this is a massive tax break. A billionaire earning $800 million a year in capital gains currently pays a lower top tax rate than someone earning just $90,000 a year in ordinary income.
But it doesn’t end there. Not only do billionaires pay lower tax rates than working Americans, they also get to pick and choose when to pay taxes at all. Because they only pay taxes when they sell assets, if they don’t sell their assets, they don’t pay any taxes. That’s how many billionaires ended up with so little annual earnings that many actually had income low enough to qualify for stimulus checks last year (remember, the cutoff was $75,000 a year of income).
So next time the mega-rich whine about how they’re being unfairly persecuted, remember that all we’re asking them to do is pay taxes just like everyone else. This country values a dollar made off a rich investor’s money more than a dollar made off your sweat. We’re not targeting billionaires, we’re saying we want them to play by the same rules as the rest of the country. They’ve just gotten so used to special treatment that an equal playing field looks unfair.