Elon Musk issued a warning on Thursday against Democrats’ billionaire tax proposal that levies unrealized capital gains, saying that eventually the government will run out of ultra-wealthy individuals, following which, they will target the majority middle class.
Chiefly authored by Sen. Ron Wyden, chair of the Senate Finance Committee, the radical 23.8 percent tax rate for long-term capital gains on tradable assets would be targeted at those making a billion dollars or more in annual income or $100 million or more for three consecutive years. This puts around 700 Americans in the bracket whose wealth is mostly concentrated in stocks.
Existing laws prevent the government from taxing “unrealized” gains or unsold stocks. The new law changes that to include unsold stocks and adds them into the individual’s income that is subject to taxation. The recently proposed changes by the Democrats are mostly to fund their $2 trillion “Build Back Better” campaign.
The billionaire tax proposal is facing stiff opposition from many Democrats as well, including House Ways and Means Committee Chairman Richard Neal of Massachusetts and West Virginia Sen. Joe Manchin.
“I don’t like it. I don’t like the connotation that we’re targeting different people,” Manchin told reporters. He also praised American billionaires’ contribution to society through investments, job creation, and philanthropy.
The other critical issue facing the proposal is the legality of whether the Constitution gives Congress the right to tax wealth. It is likely there will be legal challenges if the controversial plan is passed. Opponents can argue that unrealized gains cannot be counted as income, and thus, must not be taxed.
According to Musk, “this tax only covers ~10% of the $3.5 trillion spending bill. Where will the other 90% come from? The answer is you.” Musk, with a net worth of almost $284 billion, had recently dethroned Amazon’s Jeff Bezos as the richest man on the planet.
A recent surge in Tesla’s (TSLA) stock price following the mass purchase by Hertz of 100,000 cars made the company part of the trillion-dollar club. Musk owns more than 20 percent of Tesla shares.
As a response to a supportive tweet, Musk said he is better suited at allocating capital than Treasury Secretary Janet Yellen, “Who is best at capital allocation — government or entrepreneurs — is indeed what it comes down to. The tricksters will conflate capital allocation with consumption.”
