Tesla's Musk Paid at Least $593M in Income Taxes in 2016 | Hacker News Reader

Tesla's Musk Paid at Least $593M in Income Taxes in 2016

bloomberg.com

103 pointssubmeta148 comments

That's $593M taxes on $1.34B earnings on exercising stock options...44% tax rate is pretty harsh!

I got interested in the utility of money a while back and how the "value" of money is roughly logarithmic as it goes up. I found a couple of thought experiments regarding a "logarithmic flat tax". Anyway, going by that I think it's about right - it might still be a little bit high, though. Depending on how you calculate it those plans can be configured so that he should have paid more in the 35-40% range.

Basically, you take revenue, divide it by the poverty level (he's got six kids, so around $45k - $50k), take the log base 10, and multiply by some constant that would be the same for everyone to match the government spending level - that constant these days is probably around 9 or 10. The result is your fair tax rate.

Sounds like reasonable policy but incredibly obtuse. All taxpayers should be able to calculate and file their own taxes. The more complicated the easier to game and manipulate.

I'll go as far as to say simplicity should be the driving motivation, not equality.

The proposed system seems a whole lot simpler than the existing one to me.

It's implemented as a literal table lookup anyway, so it wouldn't be any different from the taxpayer's standpoint.

This proposal, given it can be described in a single HN post, is vastly simpler than the present tax code. It would similarly be trivial to make a calculator for this and present it on the IRS site for those who don't feel like calculating it.

Do you mean "fair" in the sense that it tries to be equally painful for everyone?

That seems like a reasonable interpretation of fair.

It taxes an equal amount of utility-of-money, I suppose.

https://en.wikipedia.org/wiki/Marginal_utility#Diminishing_m...

Interesting.

Can you add a little detail, perhaps a formula?

Do you mean that if someone earns R, they pay $C*log10(R/P), where P is some poverty level for them and C is a constant around 9?

Yeah. It's a bit simple - like, we're not going down to infinite negative income tax for people below poverty, just assume zero tax paid for them.

To find C, you have to sum up the log10(R/P) for everyone (including corporations) in the nation and divide that into what the government needs. There's various ways to calculate what the government needs, perhaps you separate FICA and payroll tax income entirely if you keep that, or perhaps you just look at entire Federal spending, I believe around 3.8 trillion.

But to sum up the log10(R/P), you need income distribution data. Someone else did that very roughly with a spreadsheet, I haven't tried it myself. A few years ago when they did that, they figured 3.7 trillion for spending, and C was something like 8.86.

C would also be a bit higher if you were also trying to pay down the debt over a period of time.

Unfortunately, I don't understand the logic behind this. I would have thought that a flat tax in terms of utility would solve for the amount of taxes T in log10(R/P) - log10((R-T)/P) = C for some constant C across the population. That would correspond to taxing everyone an equal amount of utility, assuming a logarithmic model of utility.

If the tax itself is proportional to the utility function, that has the effect of taking much less utility from people with greater R. I'm also unclear on how your C works out. The largest company in the world makes less than $1 trillion per year, so even if P is $1, log10(R/P) is bounded above by 12. Given a US budget of several trillion USD, that seems to make C multiple orders of magnitude bigger.

Sorry if I'm missing something. That was my original reason for asking for a formula above.

Not really. Go look at the tax-rates of the 1950's. The only way he was able to acquire that much money was because of the infrastructure paid for by tax revenue. The only reason he wasn't robbed by someone else was because of the law enforcement paid for by tax revenue. I could go on, but I think you get the point. His wealth is built upon the shoulders of tax revenue.

There was no income tax in the US prior to 1913. Did people go around murdering and stealing? Was everyone poor?

Traditionally, all the things you mention are NOT paid for by income taxes even now.

> There was no income tax in the US prior to 1913.

Did I say income tax revenue or just tax revenue?

After you look at the tax rates of the 1950's, go look at the tax code. The nominal rates were higher, but there were many more ways to shelter your money.

In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%

https://www.wsj.com/articles/SB10001424127887324705104578151...

Worth noting that he'd likely have netted about the same in the 1950s. Despite the constant assertions of those who fondly reminisce about the days of 90%+ income tax rates, there were so many more deductions that it all basically came out the same, while disincentivizing the outright hiding of wealth.

Moreover, the law enforcement that prevents him from being robbed is paid for by tax revenue, but not federal tax revenue, and the amount he's paid is in addition to the $593 million he paid in income tax (assuming that doesn't account for state income tax - the actual article isn't available for me to read right now due to server load).

FBI? Also, who mentioned federal tax revenue or income tax? It wasn't me.

I'm not sure I understand the point. Are you asserting that the FBI is keeping muggers and highwaymen away from Elon Musk's money?

Edit, to respond to your edit, which added "Also, who mentioned federal tax revenue or income tax? It wasn't me."

The title of the article we are ostensibly discussing.

It's funny that you mention highways since they wouldn't exist w/o tax revenue.

You clearly aren't aware of the many and myriad forms of highways we've had in America, including private toll highways, and the National Road, which was funded by the federal government, but predates the federal income tax by more than 100 years.

Again, I never mentioned income tax. Secondly Merriam-Webster defines a highway as "a public way" (e.g. not private).

By that definition, there are many government-run highways that must be excluded from the definition. Further, privately owned does not mean publicly inaccessible.

If your assertion is that you're referring to all forms of tax revenue, then your original post should probably not refer to tax rates. Otherwise, if you're just arguing in favor of all taxes, then it seems overly broad for a discussion on income tax revenue.

Either way, we've had public ways that existed without having been funded by any forms of taxation. Unless you're specifically attempting to pick the only definition of the word that bolsters your argument, while ignoring all other definitions, then it remains a truism that highways themselves do not exclusively originate from tax revenues, and are in fact capable of existing without taxes altogether... and it remains true whether or not one considers taxes to be universally good, bad, or anywhere in between.

> Are you asserting that the FBI is keeping muggers and highwaymen away from Elon Musk's money?

Assuming some keeps some share of his money in US banks, or invested in firms which keep their money in US banks, absolutely. Well, "bank robbers" instead of "muggers and highwaymen", but I'm assuming that Musk doesn't carry enough cash on him that the latter are nearly as important as the former in terms of risk to his money, though they might be a bigger threat to his personal safety.

https://www.fbi.gov/investigate/violent-crime/bank-robbery

> the law enforcement that prevents him from being robbed is paid for by tax revenue, but not federal tax revenue

Not only are his financial institutions protected by federal law enforcement, but state and local law enforcement recieves federal funds, so the above claim is false on several grounds.

I agree that it's a lot, but I disagree that it's harsh.

That leaves him with $747M for the year.

>That leaves him with $747M for the year.

I'm not sure what this is supposed to suggest/demonstrate.

Surely you agree that taxing (say) 20% of 60k is different from taxing 20% of 1B. Namely: the former has a much more significant impact on quality-of-life then the latter...

Figuratively speaking, what can you do with 747M that you can't do with 300M?

(Before the pedants inevitably pick this rhetorical question appart: the point is that it's not prima facie unreasonable to tax extreme wealth significantly more heavily than the median income)

Edit: the first of the pedants have arrived... sigh...

Have a much greater chance at purchasing a controlling stake in a US sports franchise (likely still need to go in with some partners).

>>Figuratively speaking, what can you do with 747M that you can't do with 300M?

Invest in starting brain-computer interface and rocket companies

And I believe a boring company, hyperloop, other efforts in AI, etc.

A more substantive question is how that money would be spent by the relevant parties. I would argue that Musk would spend it better than the federal government and as such, he should have it.

Then you'd end up having a fairly stupid argument about the semantics of "better".

Far better to have that conversation than to sit and argue fairness, equity, and justice. The alternatives are dumber.

Downvoted because, well, you didn't make much of a point really.

The idea that the argument is stupid should be presented with an argument as to why. For what it's worth, we have existing law in most (American) municipalities that support the argument that if Musk can be shown to be a better steward here, then he might have a claim to make, i.e., adverse possession, which is basically a claim against the state that says "I can tend to this property better than you, and my doing so provides social and financial utility to the state, to my would-be neighbors, and to myself as well.

To be sure, it's an argument in abstracts, but there's precedent enough that it clearly isn't an entirely meritless (or stupid) argument to be made.

How could that be? Suppose Musk controlled all the resources in the world. What motivation would he have to allocate them fairly?

What motivation does he have right now to do all the things he does? So he got about $100M from the sale of Paypal a while back. He could have easily coasted on that and led an easy life and never have to work a day any more. Why didn't he? (I'm not glorifying him here by saying that he would allocate all the resources in the world fairly, neither that he should or should not be given that power, in our little thought experiment here.)

Whatever his motivations may be, we couldn't possibly allow any one person to decide over our finite resources. So, how to stop that from happening? Should there be a some kind of cap? Or maybe take some progressive amount from everyone based on some rules? And so forth.

Yes, what motivates somebody like musk after they earned 100m? Money? Or doing something relevant, challenging, satisfying? Real innovators aren't homo economicus, they don't do everything just to maximise future earnings...

Isn't this is case in point that you're wrong?

I know, poor guy has to scrape by on only $700 million.

For the US maybe. Income tax in the Netherlands (my country) in the top bracket is 52%. On the second hand, we have no capital gains tax so he might come out ahead when exercising options. On the third hand, we have a wealth tax of 1.2% on your entire capital above a certain floor (of about 20k) so he might not come out ahead in the end.

It's always interesting to see the opinions of different cultures about how much tax is reasonable :)

>It's always interesting to see the opinions of different cultures about how much tax is reasonable :)

I think you're missing his point. The raw percentage isn't as unreasonable as the difference between the parent-poster's and Musk's tax rate.

I'm not sure if the figure in the piece is only federal tax, but if so there's another 13% for California state taxes.

Not bad, but doesn't that come with social services like free medical care and greatly subsidized education?

Here in he US the middle income pays taxes and receives almost no directive social benefit, as most social programs are geared towards lower income and the rich can afford accountants and lawyers to keep their tax burden very light.

I'm not sure how you can say that the rich keep their tax burden light when the topic of this thread is how Musk paid tax amounting to 44% of his income totalling over half a billion dollars.

If it were common for rich people to pay 44 percent of their income in tax, it wouldn't be a newsworthy story.

Are there people who receive millions of dollars in income via stock options who pay a lower rate? If so, how does that work?

Here's a Bloomberg article from 2012 that lists ten techniques: https://www.bloomberg.com/news/articles/2012-04-17/how-to-pa...

It's worth mentioning that none of these techniques actually apply to the case where you exercise stock options - other than the one that says basically "take options as compensation if you can because you don't pay taxes until you exercise them" which is true for everyone who gets options (because you don't get any liquidity) not just rich people with expensive accountants.

The only techniques that apply to income taxes are the "borrow against stock technique" (has a big caveat about a rich person who lost in court when he used it) and the deferred compensation example (which is also zero liquidity; presumably you pay all of the income taxes when you actual get the money).

The article makes a better case for ways to avoid death taxes or real estate taxes though.

I think the story here was the dollar amount, not the percentage.

>rich can afford accountants and lawyers to keep their tax burden very light.

The top 5% in the US pay 55% of all Federal income taxes.

The top bracket is 52.9% in California. Of course, the Netherlands' tax brackets are much less progressive than those in the US/California; the top bracket is around ~$80K vs. ~$1M.

In the Netherlands, his bonus and income would have been structured differently, he'd have had a personal holding to 'catch' the money before it would have been taxed income or capital taxes, and he'd have paid next to nothing (yet). He could have delayed selling off stock to pay taxes for as long as he'd have wanted.

I'm not sure how entrepreneurs do this in the US, is Musk being patriotic paying so much taxes, or is there really no way to delay/avoid having to sell stock to pay taxes?

There's a big difference between tax rate and effective tax paid.

44% tax rate is not too bad. Note that people with lots of money got their money by leveraging the system. A well run system is not cheap. The court system, the legal system, law enforcement, the education system, welfare, defense, etc all cost money. The higher percentage tax is only fair to pay back to the system that generates the big gain.

Especially if you take into consideration how much Musk has personally benefitted from a well funded government.

>Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times.

http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015...

And that's just direct subsidies! Don't forget that rockets, autonomous driving[1] and solar power[2] were developed by the government.

[1] https://en.wikipedia.org/wiki/DARPA_Grand_Challenge

[2] https://en.wikipedia.org/wiki/National_Renewable_Energy_Labo...

The idea that he personally used $593M, much less $4.9B worth of government services in 2016 is pretty silly.

He is far from being the sole owner of those companies.

The idea isn't that he personally cost the government that much money in service fees. It's that, without those services, he could never have made his money in the first place.

Here is a good breakdown of that $4.9bn number https://electrek.co/2015/06/02/complete-breakdown-of-the-4-9... Incentives for creating jobs & tax credits.

Not bad compared to the $12 billion cost for the GM bailout and $4 billion+/yr for oil & gas subsidies.

If you look at money invested, govt should have let GM go under the bus. Bailouts aren't a great long term fix. They just encourage shitty management

I think there's a big flaw in this argument, because it doesn't get applied universally. In my opinion people who would have starved to death or died from some medical problem except that the government stepped in and took care of them gained far more than Musk did. I'm not saying I know what Musk's tax rate should be, but the argument that it's somehow related to the benefits provided to him by government seems spurious. If that were the case then surely you'd support a pay-as-you go funding plan for all government services, right?

I don't think there's anything harsh about living off of hundreds of millions of dollars of income after taxes.

He lives in California. 9% of that was to the state.

13.3% actually... this is why I don't understand why anyone starts a company in California when you can go to other states like WA that have no income tax

And yet the roads in WA are still better than most of CA.

That's a pretty big stretch. Roads in WA are awful.

Ha ? CA has much better roads than WA outside of Bay Area. Also, if you look at the average tax burden it will come out to be the same. CA has very little property tax for commercial property for example and has lower alcohol and cigarette taxes. There are probably a few other areas where taxes in CA are lower than WA

Good point, he was subject to the extra wealth tax.

As someone who just started a company in California, I can tell you why I did it. The main reason is because I already live here. My family lives here, as it has for the last three generations.

I like the fact that I get great weather year round, that I live amongst a diverse group of people, and can get just about any kind of food I want very close by. I like that my child will go to school with people of all colors and religions and beliefs. And my cost of living is lower in the sense that I don't have to pay a ton of money for heating in the winter and cooling in the summer, nor for a bunch of clothes I can only wear 1/2 the year.

As for the business, yeah, it's not great, I'll admit that. I don't like paying extra corporate taxes for no apparent reason (I'm incorporated in Delaware, why am I paying CA tax?). And I may not even hire here, since I'm fully remote and hiring in other states is viable for me.

But if I were going to open an office and hire local, I would most definitely do it here in California, where a lot of the talent live and a lot of the people I would want to hire who like the same things I do.

Not that long ago we had 90% tax rate (70% effective) in USA. It's been plummeting since WWII https://en.wikipedia.org/wiki/Taxation_history_of_the_United...

That was a nominal but not realistic rate for the very wealthy / high income. IIRC, dividends were not taxed at that rate. More info from this commentor: https://news.ycombinator.com/item?id=14168781

70% effective as I wrote.

Today's top rates are no different, in that people including corporate artifcial ones don't pay it.

Top Fed capital gains rate of 20% + NIIT (3.8%) + California (13.3% top rate) — where does the other 6-7% come from? FICA?

Worth noting: the gain on those share from here on out will be taxed at the capital gains rate, assuming he holds onto them for a year. In California I think that tops out at 33.3%.

Also, in the mid 20th century (a very high growth time for the US) personal income tax topped out around 90%. "Harsh" is definitely a matter of perspective.

The United States used to have over a 90% income tax, and many other countries even now have much higher tax rates than the current US rate. 44% is not harsh at all.

It's very strange how people now seem to feel like they are entitled to see the tax returns of public or well-known figures. Tax returns are nobody else's business! Would you demand to see their medical records as well?

The implicit subtext (especially with highly successful people like Musk) is that we do this to "make sure they pay their fair share". Here's the reality: the top 1% of US tax filers pay nearly half of all US income taxes[1]. The bottom 80% of filers (by income) pay only 15% of all taxes. This myth that the rich don't pay taxes is completely, utterly false. It is a myth promulgated for political purposes.

1. http://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fede...

Sure as a percentage of total taxes paid, but they generally pay less as a percentage of their income or worth. Which is a better measure is certainly a reasonable discussion, but saying that one is unequivocally politically motivated while the other isnt, is odd.

I think people care that the rich pay a smaller proportionate rate[1] than the poor. People who make under $19k a year pay twice the rate of those making $470k+

Comparing total of taxes paid and leaving it at that is generally a tactic to distract from the proportion problem.

1.http://www.itep.org/whopays/full_report.php

45% of Americans pay 0 federal income tax. That is a very small rate

Federal income tax isn't the only tax out there...

That doesn't change the fact that people making $19k a year are paying more taxes proportionately than someone making $400k a year, so I'm not sure what point you're trying to make.

Are you suggesting someone makes less money so they pay less taxes? or are you just trying to change the subject?

Apple was criticized for not sharing the health condition of Steve Jobs earlier than they did.

That's fine. I still want them to pay more.

I'm not sure that I would like to see their medical records but there was a lot of talk about medical records for public figures this past election cycle in the USA. It went so far that Mrs. Clinton offered up her records for review. http://www.cnn.com/2016/09/14/politics/clinton-campaign-rele...

The truth is if you're going to be a public figure like a CEO or Elected Official you better be ready to give up some if not all of your privacy.

ceo of a private corporation === public figure?

CEO of a public corp maybe

I disagree, but I don't think that people should have down-voted you.

It's not "well-known" that is the determining attribute. It's being a CEO of publicly traded company (which have fiduciary obligations to their owners to disclose things that may affect value of their property, i.e. stocks) or being top-level politicians who's influence over everyone's lives justifies some privacy violations.

> the top 1% of US tax filers pay nearly half of all US income taxes

The top 1% also own more than 50% [1], so if they would pay their "fair share" they'd still need to pay more. Much more if you think that the differences should become smaller.

[1] http://fortune.com/2015/10/14/1-percent-global-wealth-credit...

Apples to oranges comparison. One is talking about the US. The other is talking about the world.

I wonder how much of the world's burden those 1% actually are paying? Why do you think they would still need to pay more?

Fair. For the US, the top 1% seems to own 40% of all wealth, a little bit less but still a staggering number i.m.o.

My problem with this is not so much the wealth of the top 1% in itself, but the lack of equal opportunity in the bottom 50%. A child that is born in this demography has much, much lower chance on a successful life than a child that is born in a wealthy family. That simply can't be fair.

https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...

>That simply can't be fair.

This word "fair" keeps being thrown about in these discussions.

All such discussions are useless unless the people involved specify what they mean by "fair". And I'll give you a hint: You'll find many people will disagree with your definition (and there isn't consensus on any one definition).

A simple example: Fairness in equality vs fairness in proportion. The former is about everyone having equal services/wealth/etc (usually aligned with far left), and the latter is about everyone having these in proportion to their efforts (usually aligned with far right).

Neither is right or wrong.

High wealth inequality, while often correlated with lower opportunities, does not fundamentally imply it - it is not a causation. Using it as a metric is a poor choice. Instead, the metric should be what the lowest N% have access to, regardless of the wealth inequality. You can get low wealth inequality where everything is bad for everyone, or high wealth inequality where only a few "suffer".

Just saying something is "unfair" without explanation is merely an attempt at making an emotional argument. It is identical to just saying something is "wrong".

Fairness means getting what one deserves.

The world is unfair in many ways, and I thought I was quite specific in my example of this by comparing two baby's: one born with top 1% wealthy parents, and another one born in the bottom 50% income parents. The baby's have done nothing in their lives yet and are equally talented, yet one of them will almost certainly have a much better life.

Unless you want to argue that the rich baby somehow deserves more, I think it's better to assume she was just lucky being born rich. And this luck will extend throughout childhood: positive environment, more friends, better care, better schools, etc.

You are right that this still does not make it unfair. This is all luck. But what would be unfair is when the rich kid gets to inherit all of the wealth, and not pay a disproportionate part of that wealth toward taxes that are needed to pay for the poor kids' education and healthcare, to give her at least some chance to grab an opportunity and work herself to a somewhat better life.

>Fairness means getting what one deserves.

Merely begging the question. You might as well say "fairness means doing the right thing."

In your comment, you've use the word fair/unfair, but still not specified a proper criterion.

If you want to say baby's born to the lowest percentile should have the same opportunities as those in the top, that's a concrete statement (measurable, etc). Why do you have to bring the word "fair" into it?

Incidentally (and off the topic of fairness), there are easy ways to solve the problem - but those are ways no one (including, I'm sure, you) would accept. So looking at one criterion in a vacuum with the rest of society is problematic.

>public or well-known figures

you're equating two unrelated issues. Nobody needs or is entitled to a private company's CEO's tax returns. However, it is totally reasonable to see the tax returns of a politician who makes decisions on a daily basis that could very easily be tailored to line his pockets. It is not about tax returns, it is about transparency and accountability. Even in the CEO's case, if the board of his company wants to see his returns, I would not really fault them. It is pretty basic requirement that you have to be accountable to the people you work for. In case of the Trump (I am assuming he is the reason for your comment), he seems to be confused about the roles. People are not his employees or customers. They are his bosses. The former don't need to see his finances, the latter do.

The video clip seemed unusually harsh. The reporter said he'd announced the Hyperloop to "thrill and confuse"? Followed by several skeptical tones and questions all while contrasting it with saying he'd done things no one else had.

On the other hand this: "Elon Musk's growing empire is fueled by $4.9 billion in government subsidies"

http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015...

Sounds like money better spent to me than the 5 trillion dollars in global fossil fuel subsidies in 2015, or 500 billion just in the US[1]

That 5 billion number for Musk I think is a grand total of all subsidies, spanning all time.

[1] http://www.sciencedirect.com/science/article/pii/S0305750X16...

I don't have to click any like to know that the US did not spend $5t on fossil fuel subsidies. I'm pretty sure the US only spent like $5t total in 2015, and most of that is in medicare and social security.

"GLOBAL fossil fuel subsidies"

That $5 trillion figure isn't actually spending at all. It's entirely an invented figure, meant to supposedly cover all estimated environment damage for example. Really what it's meant to do, is be massive enough to enable people to throw it around when arguing in favor of obliterating the fossil fuel industry.

Why does the invented aspect matter? Because it's comical. It leads to the premise that over just the next 10 years, the subsidies are a likely cumulative ... $56 trillion or so (about 20%-25% of all wealth on earth). Aka, greater than the combined profit of every oil company in world history going back ~140 years.

Imagine you ran a small, successful business. Imagine, as part of that business you killed someone every year.

Now, we could look at your tax returns and see that you have a successful business. Or we could "invent" some figure to represent the lives you ended.

Is it really crazy to imagine that the total we invent would be higher than your yearly, or even total profits?

Just scale that up to the point that you're starting wars, causing a crime epidemic with lead poisoning, overheating the planet, etc.

The "subsidies" that your link talks about seem to be mostly about externalities. Ignoring for a second that it seems extremely hand-wavey, the biggest "subsidy" is "46%, broader vehicle externalities", which would apply to Tesla as well?

I'm not sure in what other case it's considered appropriate to lump all the subsidies together in a total just because one person happens to be involved in each. On a case by case basis, each company is fairly large, and possibly not even unusual in the amount of subsidies it gets. Large companies often get lots of subsidies, because they target them, strategically. In this respect, Tesla is no different than GM or Ford, SpaceX is no different than Boeing, and Solar City is no different than General Electric. Each of those non-musk companies were in the top five of total Federal, State and local subsidies recently[1].

Calling out Musk's companies as exceptional in this regard makes for a nice narrative, but isn't necessarily supported by the facts.

1: https://www.washingtonpost.com/blogs/govbeat/wp/2015/03/17/t...

Most big companies do get some form of subsidies. Tesla is nearly 30,000 jobs in the US alone. 5 Billions is not much for such a big company.

It's not even 5 billion for Tesla, it's 5 billion for Tesla, SpaceX and Solar City combined. Three large companies in what I would assume are some of the most subsidized industries in the U.S. (automotive, aerospace and power utilities).

Wow, this is impressive.

The article mentions that he kept the remaining shares (as opposed to selling them as well). I wonder what is the general strategy for founders to cash out their stocks? Of course holding the shares for 1 or 2 years to get short/long-term capital gains tax breaks makes sense. But outside of that I imagine there is a balancing act of not selling so many shares to raise investor's eyebrows, but also freeing up money to diversify your assets.

Imagining this scaled down to options that someone might get for joining a startup early... wow.

Not sure about everyone else, but I'd love to have this problem. Oh I have to pay $593 million in taxes? Boo hoo, let me cry all the way to the bank to write the check.

Imagine that you are a GAFA CEO 2 years before you IPO and you are asked to pay 593 millions based on the estimated value of your shares.

Yes, and?

Am I supposed to feel sorry for people with hundreds of millions in liquid assets?

Absolutely not.

Stick to "Justice for Most"

I keep trying to imagine it, but I can't get past the part where I'm excited about having hundreds of millions of dollars.

Just having hundreds of millions of dollars wouldn't be particularly exciting once the novelty wore off. The exciting part is earning hundreds of millions of dollars via the immense success that it implies/requires.

Funny enough, the IRS won't take a check that large. He'd have to write six of them. Definitely a problem I wish I had.

> No checks of $100 million or more accepted.

> The IRS can’t accept a single check (including a cashier’s check) for amounts of $100,000,000 ($100 million) or more. If you are sending $100 million or more by check, you’ll need to spread the payment over 2 or more checks with each check made out for an amount less than $100 million. This limit does not apply to other methods of payment (such as electronic payments). Please consider a method of payment other than check if the amount of the payment is over $100 million.

https://www.irs.gov/instructions/i1040gi/ar01.html#d0e35370

I wonder how much the founders of Google paid. Or the CEO of Apple. Or Uber's founder. Or for instance Mr Trump.

It really depends on the year. The people who top income tax payments one year will generally not be anywhere near it on subsequent years because they don't draw a steady income, but instead cash out periodically. So while none of the people you've listed are likely to be in this years top earners, at some point in the years prior, or in the years to come, you'll likely see their names pop up. And when they do, they'll have paid some massive amount of money in taxes.

$593M could be used for developing the company and its products.

What is the point of this comment?

I initially misread "company" as "country" - and in that interpretation I wholeheartedly agree.

Wow. That's a yuge amount of income.

A narrow and literal reading of events makes Musk the richest african american. It's pretty depressing the richest african american is white

Why is that depressing? ...

You haven't gotten the memo? Racism is ok if it's against whites.

Silicon Valley employs so few blacks that even our Africans are white.

A lot of Africans are white, especially ones settled and controlled by Brits at some point.

Not to mention North Africans (Morocco, Algeria, Tunisia, Libya) and Egyptians. I'm a Tunisian-American, but I obviously select "white" in demographic questionnaires. I heard that the U.S. Census Bureau is planning to introduce a Arab/Middle Eastern category in the near future.

oh man, human "race" is such a complicated concept....as an example, Zidane who is Algerian descent by all means would be considered "white" in the USA...but then he is also an African who was born and grew up in Europe.

https://upload.wikimedia.org/wikipedia/commons/thumb/b/bc/XI...

In the UK there are lots and lots of people from South Africa, Zimbabwe and other places where things may have been good for their 'baby boomer' parents that got rich in deeply racist times, but for kids today?

If you are in your 20's or 30's or even 40's then having white skin in South Africa has not had the same advantages as before, there has been government legislation to make the place a bit more equal opportunity, which means to the younger people in South Africa that, if you are white, it is time to claim some type of UK passport (maybe based on some grandfather that was Scottish).

I am no defender of Apartheid but the ruling baby boomer white class essentially retired and threw their own children under the bus.

I'm not trying to deny the (until very recently legally enforced) class difference between whites and blacks in South Africa, nor the social issues causing hiring discrepancies in the States.

However, it's not a narrow reading of events. Musk is African. Head a bit out of the way in South Africa and you'll find white kids who spend all day running around with black friends with the whole group speaking fluent Zulu. They've grown up there and their families have been there for generations.

> Musk is African

Actually, since we're being technical about it, he's American-Canadian-African. How else to define it? One could say African born, certainly.

He has lived in the US longer than he lived in South Africa at this point. He hated South Africa according to his brother, and sought to flee as soon as he could. He considers himself an American and has stated so on numerous occasions.

The problem here lies with the imprecise term 'African American', a designation which, according to customary usage, includes many native-born Americans who have never been to Africa, as well as excludes many native-born Africans (like Musk) who are also Americans.

As a thought experiment, if you define Americans as those with natural rights, then every human being on Earth could be considered African American.

Although I've met a surprising number of intelligent people who somehow do not believe we are all descended from Africa. Which I suppose is related to people failing to understand that all individuals have innate inalienable rights, regardless of their citizenship.

Sure, we're all descended from Africa. But we all know that ethnographic definitions are arbitrary, and how long ago you or your ancestors immigrated apply more or less to your demographic label depending on a host of cultural, social or economic factors. The definitions are convenient only in labeling populations in broad strokes anyway; every individual has multiple ethnic, religious, cultural, racial identities that can be sliced/defined/labeled any way that society deems 'normal'...

it is even more depressing to read what racists like you have to say everywhere

Agreed, some people need to make everything about color.

I personally think that after the first 1.5 million that they tax rate should be 100%. That's still an incredibly large amount of money. After that we need the resources to tackle problems and we can't if people hoard them.

I know that it sounds simple, and lots of people on this site will disagree, but I'm having trouble justifying this kind of extreme wealth to myself anymore.

There are so many people in poverty and ignorance. What's it for any way if people are starving and illiterate?

I'm really not looking forward to some of the responses to this comment, but I find myself thinking more and more about the morality of letting people accumulate massive sums when the resources that wealth could muster go unused by the people that need them most.

I don't know. I'm genuinely interested in hearing what other people here have to say if you can keep from being condescending or mean. Please be nice.

> I personally think that after the first 1.5 million that they tax rate should be 100%

Not that I'm anywhere close to this problem, but I would simply stop working after hitting that mark. Why would I work for free?

That's a valid question, but I think that people would do the things that interest them. After earning 1.5 million in a year, what would be wrong with not working?

>I personally think that after the first 1.5 million that they tax rate should be 100% Remember, Elon funded SpaceX and Tesla with the wealth he generated from the sale of Paypal. Where would the funding have come from for those entities if he was taxed at 100% after 1.5mm?

To be fair, he has raised money from investors to start those companies. I'm not advocating for the end of banking, so people would still be able to borrow money and invest. I'm also not talking about taxing wealth, but income.

SpaceX is interesting because we could be doing that stuff at NASA if it were funded well.

I get what you are saying though, it would have an effect on investment and speculation. Maybe we don't need as much of those things.

I'm also not saying that this is particularly well thought out.

I'm not convinced it'd work. Not to be mean at all, just realistic.

The huge bulk of this tax bill was from exercising stock options. According to another commenter here, 44% on $1.34B earnings from these options.

So given a $1.5M cap, these options simply wouldn't have been exercised. You'd use your options up to the $1.5m earnings ceiling, and then stop. So the tax 'purse' would receive the pre-ceiling rate on $1.5M instead of 44% of $1.34B.

A 100% ceiling sounds very straightforward, but the end result would have been that Musk would have paid over $592M less in taxes over the same period - and I'm pretty sure that wasn't your intent.

(sidenote: With regards to the morality - under your proposal, the Bill & Melinda Gates Foundation wouldn't exist. I think I'd rather any proposal allowed for such altruism.)

Genuine response here:

From a strictly utilitarian/consequentialist perspective, capitalist systems has proven to be pretty good at improving the quality of life for everyone. You're suggesting essentially eliminating medium-to-large prizes for succeeding in that system. Destroying those incentives strikes me as being fairly risky. You could end up causing more harm than good.

An interesting thought experiment to go through might be to compare two worlds: One in which we do as you suggest, and another where we continue on with the current system.

In your world, we might use the extra taxes to fund a medicare-for-all style healthcare system, free college tuition for everyone, and perhaps some large infrastructure program. More people have better health care coverage, would go to school for free, and be able to subsist on government-funded jobs. However, innovators, investors and entrepreneurs would be curbed back -- we get less technological innovation, fewer improvements in communication, education, medicine, technology, food production, travel, etc. It's difficult to predict what kinds of technologies we would miss out on, but it could be massive.

Would we miss out on an important cancer drug? Or perhaps the solution to climate change? Or maybe we would miss the boat on AI-driven cars?

As a heuristic, it seems to me that the biggest improvements in the quality of life of humanity so far have come not from socially engineered programs, but have rather come from entrepreneurs and inventors. It seems unwise to take our foot of the gas in that regards.

Wow. Lots of down votes...I'm shocked.

Assholes.

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