Why can American billionaires live without taxes? That’s because they don’t have any real money. Instead, they hold billions of dollars in stocks, and the state does not tax the unrealized gains.
But what if I did? South Korea plans to do so. The Netherlands also tried to push it. Some US lawmakers are discussing their own versions. The goal of these tax initiatives is wealth like Elon Musk’s.
He became the first trillionaire on June 12, with a fortune built almost entirely on unsold stocks. Move it to Seoul, or change US law, and the bill will arrive. But the main question is how big?
Tax laws spread around the world
the The latest flashpoint has been reached In Seoul. This week, lawmakers and labor groups proposed incorporating unrealized gains in stocks and real estate into the income tax.
in HollandThe lower house of the Dutch Parliament passed the Effective Yield Act of Box 3 on February 12, taxing annual paper gains on stocks, bonds and cryptocurrencies at a flat rate of 36%. The law targets the beginning of 2028 and still needs Senate approval.
The backlash was swift. On February 25, the Finance Minister said the measure could not proceed as written and would require amendments. foot I mentioned Earlier this month, the coalition led by Prime Minister Rob Gittin was preparing a round of concessions.
US lawmakers target ‘buy, borrow, die’ playbook
In the United States, Senator Ron Wyden imposed a billionaires’ income tax. The bill, sponsored by more than 20 members, would tax tradable assets, such as stocks, annually at market value.
“The purpose of this bill is to require billionaires to pay taxes annually by eliminating the ability of high-income and high-net-worth taxpayers to use tax planning strategies such as ‘buy, borrow and die’ to postpone paying taxes indefinitely.” invoice He reads.
the The draft law does not specify anything new Tax rate. Instead, things change when the wealthy pay. Tradable assets, such as stocks, will be traded to the market each year and taxed as long-term capital gains.
This means that the current top rate of 23.8% (long-term capital gains rate of 20% plus net investment income tax of 3.8%) applies annually and not just upon sale.
Meanwhile, gains on non-tradable assets such as real estate and private companies will be taxed at the normal capital gains rate plus a “deferred clawback” interest charge, with a combined total cap of 49% of gains.
Representatives Steve Cohen and Don Beyer introduced an identical House mate, making this the first Congress to impose a bicameral billionaire income tax.
Notably, the numbers show a coordinated push. In March, Senator Elizabeth Warren He reintroduced the Ultra-Millionaire Tax Act.
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Warren He plans An annual tax of 2% is imposed on every dollar in value over $50 million. The rate rises to 3% on every dollar of net worth over $1 billion (an additional 1% tax on the 2% base).
Separately, California voters will decide the wealth tax issue next November after the measure qualifies for the ballot. California’s billionaire tax law imposes a single tax of 5% on residents whose net worth exceeds $1 billion.
The Billionaire Tax Coalition has now written to Gov. Gavin Newsom, indicating he is open to compromise. The group said it would support a lower interest rate of 2% instead of the 5% it had initially sought.
A fortune worth $945 billion is barely touched by the tax code
Meanwhile, musk He set the wealth milestone The “tax the rich” story is back in focus. It reached the trillion mark when SpaceX (SPCX) listed on the Nasdaq on June 12.
Then the technology sell-off led to a drawdown The stock fell 24% from Highest on June 16. As of June 26, Forbes estimated it at $945 billion.
He still leads the rankings by a large margin, with Larry Page coming in second place with about $281.6 billion. The bigger story for tax policy is what happens to that wealth each year.
Even after this slide, SpaceX holds the majority of its wealth. Musk’s base salary at SpaceX remains at $54,080 per year. Unchanged since 2019.
However, his stake amounts to about 4.76 billion shares. According to Bloomberg, it is Exclude Approximately 1.3 billion unvested restricted shares tied to performance and other conditions, as well as 237,530 shares pledged as debt security.
He also has 350,000 exercisable options. At the recent price of close to $153, the stake is worth about $728.3 billion.
The introduction of the Model 4 in June 2026 puts his stake in Tesla at approximately 11%. This number excludes the 424 million restricted shares of the 2025 CEO award, which is only awarded if performance and other conditions are met. Musk also has stakes in his two startups, Neuralink and The Boring Company.
Tesla has never paid a dividend, so almost all of its returns are appreciation in the value of paper. Current US tax law that is only for sale. So a wealth of about $945 billion does not produce a relatively high tax bill.
Previous filings show the pattern. ProPublica I mentioned He paid $455 million on $1.52 billion in income from 2014 through 2018, and paid no federal income tax in 2018. Gauging the growth of his wealth, ProPublica put the true tax rate near 3%.
The distinguishing feature is how little cash is available. His wealth is stocks he did not sell, not money in the bank.
What would Musk owe if these taxes were applied to him?
The answer depends entirely on the type of tax applied. Wealth taxes amounted to his total net worth. Unrealized gains taxes Multiply the annual increase only.
Let’s start with Warren’s wealth tax, which was applied to his roughly $945 billion fortune. The 2% rate covers the range between $50 million and $1 billion. The 3% rate covers every dollar over $1 billion. Together, they generate about $28.3 billion annually.
Wyden’s bill works differently, as it imposes a tax on gains rather than on the stock of wealth. Assuming the cost basis is negligible, almost his entire wealth can be treated as unrealized gain.
The first year is out. With no previous mark, the first assessment captures the entirety of his accumulated gains. At 23.8%, this catch-up amounts to about $220 billion, which the bill allows it to pay over five years.
Then, its basis is reset, so each year, only that year’s new gains are taxed. Increasing revenues by $100 billion would cost about $24 billion. A flat year brings almost nothing, and a down year brings a loss he can afford.
California’s action is a single tax, not an annual one. A 5% tax on his net worth would amount to about $47 billion. The 2% compromise proposed by proponents would require about $19 billion.
The above numbers are hypothetical. Musk lives in Texas, and none of these proposals are law. It shows what each plan will accrue if it reaches its fortune.
What can this money do?
These amounts are easier to understand than global needs. The United Nations World Food Program estimates that eliminating global hunger by 2030 will cost about $93 billion annually. that it complete The 2026 plan to feed 110 million people costs $13 billion.
Warren’s tax on Musk alone, about $28.3 billion annually, would more than double that annual budget. It will also cover approximately 30% of the annual cost of eliminating hunger in the world, from one person.
Wyden’s catch-up plan of $220 billion in the first year would fund the goal of fighting global hunger for more than two years. California’s $47 billion will cover about half of one year.
Bring it home, and the gap will continue. National Alliance to End Homelessness puts No. It’s in 2025.
He suggested that about $9.6 billion would be enough to provide Housing First to families who used a shelter in the United States in one year. Warren’s annual tax on Musk alone would cover that number with additional room to spare.
The bill could disappear as quickly as it appears
The numbers have a catch, which was revealed last month. Most of Musk’s wealth is in securities and he can’t sell them quickly, and their value can fluctuate by hundreds of billions in a single day. The stock is already down 24% from its June 16 high.
This volatility cuts both ways. Paper gains are taxed only when the paper shows a profit. In down years, Musk would instead record unrealized losses, which he owed nothing and could carry forward to offset gains in other years. The same swing that creates a huge bill one year can wipe it out the next.
Liquidity is the other limit. A large annual bill might force him to sell stock to cover that bill, but his SpaceX hold currently prevents him from doing so.
Mobility adds a third. California has already lost billionaires before the deadline, and the Dutch plan has raised concerns about immigration.
For now, the gap remains. It’s real enough to rank first in the world, but it’s not taxable until the day he chooses to sell.
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this post How much tax will Elon Musk pay if this US bill is passed? appeared first on BeInCrypto.
