Elon Musk is a dick. At least, that’s the image the Tesla and SpaceX CEO likes to project on Twitter. His profile picture is a photo of a rocket, elongated and cylindrical, silhouetted against the sky. It’s a nod to his work with SpaceX, but it’s also clearly a penis. It’s a sly wink at his stans, the fanbase who make up the core of his 64 million Twitter followers.
Musk is a master at publicity, and the image is a provocation, to encourage more admirers or haters to pour into his timeline. Rich men – and no one is currently richer than Musk – still flaunt their wealth with overpowered cars or yachts, but they also now have Twitter, and we have to decide how to respond to Musk’s vanity rocket thrusting into our feeds whenever he says something clever, mean, childish or self-serving, which is every day.
One response would be to ignore him, but since his entitlements come at the public’s expense, with his companies gobbling up ever more government subsidies and tax breaks, we can’t just pretend he doesn’t exist. And his dickish online persona is a useful lens for examining larger myths about wealth in our time.
On 6 November, Musk put a poll on Twitter: ‘Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?’ When 58 per cent of respondents said ‘yes’, he proceeded to sell some of his stock. The gesture appeared democratic, an act of civic duty, even magnanimity, in response to the urging of his ‘people’.
But that isn’t the full story. In 2012, Musk was awarded Tesla stock options: 22.8 million shares at $6.24 apiece. They’re now worth nearly two hundred times that, and they expire in August 2022. He has to exercise them before that or lose the chance to earn billions. And ‘earn’ is the imperative word. This is income for Musk. He needs to pay income tax on it, like anyone taking an income, something he and other CEOs chaff at. When he posted his poll on Twitter, the share price was $1222.09. Exercising the options will net Musk around $27 billion.
‘Musk would have to pay full income tax on the massive gain in the shares’ value,’ Reuters reported, ‘but could sell some without additional capital gains taxes.’ And Tesla would be able to claim a $5 billion tax deduction for the share transfer to Musk – a loophole that President Biden’s infrastructure bill could close. ‘Musk gets the last laugh when Tesla takes a large deduction,’ a tax lawyer told Reuters, ‘which they may not get to take next year.’
The $27 billion would be taxed at the top federal rate of 37 per cent, plus a 3.8 per cent net investment tax. And because he earned the stock while living in California, before a recent tax-reducing move to Texas, he also faces state tax of 13.3 per cent. In total, as CNBC’s Robert Frank has calculated, the bill could top $15 billion. While the figure is enormous, it represents only 5 per cent of his estimated net worth of close to $300 billion.
How do billionaires avoid income tax? The easiest way is a tactic that, interestingly, is never veiled but rather broadcast as if it were a superhuman feat of ascetism: not being paid a salary. ‘Note, I do not take a cash salary or bonus from anywhere,’ Musk told his Twitter followers. ‘I only have stock, thus the only way for me to pay taxes personally is to sell stock.’
In the first sentence, Musk appears to be seeking our admiration for his forbearance in not taking a ‘cash salary’; yet the second sentence implies the situation has been imposed on him. Still, he’s determined to prevail over the barriers erected against him: the ‘only way’ to pay tax is this way, so watch and applaud.
He acts as if compensation in stock rather than a cash salary weren’t a deliberate choice made by him and other CEOs for a host of reputational and financial advantages. First, there are the perceptual gains: not taking a salary looks noble (see the first sentence of Musk’s tweet). It’s a mirage of selflessness, but it still looks selfless.
CEOs have been doing it for decades, but it has ramped up since the 1980s when sky-rocketing salaries began to worry governance boards. By switching to compensation in stock options rather than cash, everyone looks as though they’re putting the company first.
The personal bonus for CEOs is that they get to avoid both income tax and capital gains tax on shares that are not yet cashed in. They still have to live, of course, but they manage very nicely on credit from banks, collateralised with their stock options, paying interest at minuscule levels of around 3 or 4 per cent, way below the top US federal income tax rate of 37 per cent.
Politicians like Bernie Sanders have long called this out for what it is: a scam. ‘We must demand that the extremely wealthy pay their fair share. Period,’ Sanders tweeted on 13 November. ‘I keep forgetting that you’re still alive,’ Musk retorted. Was it funny? Musk’s followers thought so. Was it a dick thing to say? Look at his profile picture.
A few hours later, Musk whined that Sanders is a ‘taker, not a maker’, delighting the hard-right libertarians who love it when billionaires attack governments. Which is something that Musk does a lot, but he needs the US government too, not least to further his own wealth. For one thing, SpaceX and Tesla have both benefited from government subsidies. But there’s more to it than that. ‘We will coup whoever we want!’ Musk tweeted and deleted in 2020. ‘Deal with it.’
He was responding to criticism of US involvement in the 2019 overthrow of Evo Morales’s government in Bolivia, a country with major reserves of lithium, which is used in the batteries of smartphones and electric cars. After a right-wing, US-backed government assumed office (later jettisoned at the ballot box), Tesla’s stock soared.
Musk is happy when the government protects his interests, bitter when it claims a share of the revenue. ‘Eventually, they run out of other people’s money and then they come for you,’ he exploded angrily on Twitter a few weeks ago, condemning a new US proposal to tax the unrealised stock options that Musk and other CEOs use to collateralise their lavish lifestyles.
That’s the curious thing about Musk’s attitude to government power. Coup other people for his benefit? Hell yeah! But tax him? Not fair! In truth he’s neither all-powerful nor a helpless victim. He’s just a very wealthy guy who resents being held to the same standard as regular people. To turn his own words back on him, he hates being reminded that he too is still alive.