Billionaires just can’t seem to stay out of the headlines. This time, however, it’s not their space trips or superyacht squabbles that are making the news: it’s their tax avoidance strategies.
We recently learned that Elon Musk, CEO of Tesla and the world’s richest man, donated billions in Tesla shares to charity this past November and is set to pay roughly $11 billion in income tax. While this might seem like good news, in reality, Musk stands to gain financially from these activities. Musk will get tax benefits from donating to charity and, while he certainly is making a big personal tax payment this year, that doesn’t make up for the fact that his company, Tesla, will not pay a single penny in corporate income taxes.
As it happens, Elon Musk isn’t the only billionaire abusing our tax system to avoid paying their fair share. Harold Hamm, the founder of shale drilling company Continental Resources, made one of the largest wealth transfers in US history earlier this month. But, unfortunately, he will likely avoid paying any tax whatsoever on his gift as a result of loopholes in our estate and gift tax system.
These reports fall in line with what we saw last month with the release of the most recent Oxfam report, detailing how the world’s ten wealthiest men saw their fortunes more than double – from $700 billion to $1.5 trillion – during the pandemic. Under our current system, individuals like them can keep expanding their wealth exponentially, which once again underscores the need to tax the rich.
It’s time that Democrats did something to tackle wealth inequality and end extreme billionaire wealth in the US. Only time will tell whether they can do this before their political window of opportunity potentially closes with the 2022 midterms.
This week, we’re shining a spotlight on some of the many ways billionaires avoid paying their taxes.
Musk donated over $5.7 billion in Tesla shares to charity in November by Hyunjoo Jin
Elon Musk has gotten some good PR lately; he donated over 5 million Tesla shares, worth an estimated $5.7 billion, to an undisclosed charity in November. (Never mind the fact that this is only 2.5% of his total net worth.) What may be less obvious are the tax benefits that Musk may receive on account of this donation. He will avoid paying millions in capital gains taxes because he is donating stock as opposed to selling it, but he also may be able to deduct this donation from his California state income. So much for a good deed and good PR!
Tesla will pay $0 federal tax despite Elon Musk’s $11 billion personal tax bill by Sissi Cao
Elon Musk is set to pay roughly $11 billion in personal income tax for the 2021 fiscal year; this would be the single largest individual tax payment in US history. Musk himself has even taken to Twitter to brag about it. However, he has been less vocal about the fact that his company, Tesla, will pay nothing in corporate income taxes this year despite making a record $5.5 billion in profits. This isn’t the first time that Tesla has gotten away with murder when it comes to corporate taxes – they paid $0 in 2020 and 2019 – but it’s jarring nevertheless and highlights how urgently we need to reform the corporate tax system.
Shale King Harold Hamm is passing billions to his heirs tax-free by Ben Steverman, Devon Pendleton, and David Wethe
Harold Hamm made one of the largest wealth transfers in US history earlier this month by giving each of his five children a roughly $2.3 billion stake in his company. Hamm structured the transfer in ways that took advantage of loopholes in the estate and gift tax system; because of this, he will likely pay no tax whatsoever on it. Wealth transfer taxes have the potential to raise a lot of revenue, but they can’t until we get rid of the loopholes that allow Hamm and other ultra-rich families to avoid them entirely.
Congress passed up an obvious policy tool to fix wealth inequality by Washington Post Editorial Board
To their credit, Democrats tried to reform the estate tax in one of their original Build Back Better proposals. Specifically, they included a provision that would have ended the “stepped-up basis”- a tax loophole that allows heirs to avoid capital gains taxes on inherited assets. However, the provision was ultimately not included in the version of the bill that the House passed last November. It remains to be seen whether the Senate will bring back the provision in their version, or pass any bill at all. If Democrats are serious about addressing wealth inequality, they need to start by mustering the political courage to reform the wealth transfer tax system.
