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The Biggest Benefactor of Elon Musk's Stocks Sales - the U.S. Government

Much has been made of Elon Musk's stock sales recently. He's just over half way done and is racking up the tax bill to the U.S. government. In fact, the U.S. government will be the primary benefactor of Elon Musk's stock sales, receiving many billions in dollars for these 3 weeks of stock sales.

There is a recent video from Dave Lee, a well known Tesla investor who shares videos on investing - mostly about Tesla. He talks in great details about the sales of Elon Musk's stock options and regular shares of stock, both of which are being taxed heavily.

Elon Musk Selling Stock

First, let's take a look at where Elon Musk is today in selling stock. Remember, this is based on a Twitter poll where Elon asked if he should sell 10% of his stock in order to pay some taxes. Elon was prepared to act in either direction depending on how the poll results came out.

As of yesterday, we can see here that Elon Musk has exercised 6,376,005 shares of stock options, sold 2,802,273 shares of regular stock and is about 48% complete. There will be more shares sold today, most likely, pushing this number over 50%.

That's a lot of stock. How much will Elon Musk pay in tax? Once again, let's look at what Dave Lee has put together to answer that question:

We can see here that Elon Musk is paying the following taxes:

Federal: 37%
California: 13.3%
Medicare: 1.45%
Medicare Supplemental: 0.9%

Total: 52.65%

That's over HALF of his income going to the U.S. government. Never in any of my working years have I paid more than about 37 % of my income to the U.S. government, and that was not all my income, just a tranche of income that I earned over a certain amount.

Were Elon Musk to have his primary residence in Texas, the 13.3% California tax rate would disappear, saving Elon Musk several billion dollars in taxes...

And finally, as if this wasn't enough taxes, let's take a look at what Dave had to say about tax upon Elon's death:

What Will Elon Musk Do Going Forward?

We know that Elon Musk has stock options that will expire in 2028, which will trigger another situation like this at that time. And the share price of Tesla could be $5,000 or more. The taxes Elon pays at that time could be 5 times what they are now giving the U.S. government hundreds of billions of dollars.

I think Elon Musk is going to try and increase his stake in Tesla. He is going to use the exercised stock options to increase his permanent number of shares of Tesla stock. He will take his regular shares of Tesla stock and sell them, pay the taxes, and use the rest of the money to pay to exercise his stock options.

At some point, Elon will get out of Tesla stock. I'm not sure when that will be. He said he will be the last one out. Will that mean at some point he will sell all his shares of Tesla stock? Will he do it at the point he is no longer the CEO of Tesla? That would be interesting.

Once Elon sells his Tesla stock, which I believe will be a while down the road, he will likely use that money to make civilization multiplanetary. That means investing the money into SpaceX and StarLink - as well as Neuralink, since Neuralink will assist with the merging of AI. Elon may even take a trip to Mars if everything works out great!

The Bigger Problem

The bigger problem here is that people with assets are benefiting in a way that is much more beneficial to those with asset ownership. But for those who are poor and can't afford assets, it creates a greater gap in inequality. The U.S. government knows through its quantitative easing, that this would cause a wealth gap through extra money printing.

We are seeing inflation right now in real estate, gas, and other commodities. There is a natural flow of inflation when monetary supply increases - more money is available to everyone. Data is showing that inflation is here to stay for a while.

Rental prices have jumped over 30% in just the last 12 to 18 months, and I now people personally that have had to move out of their apartment because they could no longer afford rent.

With inflation taking place in assets only, that is a hard situation for the lower class because their money is worth less and less over time. If goods and services, including food, go up, the lower class becomes oppressed because they lack the purchasing power for them.

The government continues to spend way more than it earns and continues to justify the spending. But at some point, what happens when they can no longer spend? Will the government collapse? What will happen to the U.S. dollar?

This can be solved through deflation of goods and services, and greater serving and empathy from those hoarding wealth for their own to extend in giving to others.

What do you think of Elon Musk's sale of Tesla stock recently? Was this the right way to do it? Will he do another Twitter poll in the future?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter, Facebook, LinkedIn and Instagram to stay in touch and follow his Tesla news coverage on Torque News.


John Goreham    November 18, 2021 - 9:11AM

Good overview, Jeremy. I don't agree with all of it, but I liked the breakdown of Elon Musk's tax payments. I have to ask you, when you say rent has increased 30% over the past year or so, where has that occurred? Is it in a small area? Just cities, where real estate values are basically luxury purchases? I own three affordable housing units in Metro Boston. My rents have not increased at all in this period for two of the three and one had an increase equal to the increase in property taxes. Inflation multiplies the rent increases. Not only are the rent dollars worth less year over year, as you point out, but the property taxes, utilities, maintenance costs, insurance, and other cost-side aspects of rent (which are paid regardless of whether the unit is owned or rented) also increase. A fair estimate of the impact of inflation on rent is to multiply the inflation rate by about 2X. So, that would mean the rent increases for this year on average should be about 9%. Which is what I am seeing in the general area of Massachusetts. Aside from the fancy-pants towns like Boston, Cambridge, etc. which are a combination of luxury and government-provided housing. Here's a link that shows what has happened with rents in my region over the past year or so. Here is a national report on rent.

Jeremy Johnson    November 18, 2021 - 3:01PM

I've seen rent increases of 30% here in Utah (Salt Lake and surrounding areas) from $1,100 to about $1,400 and many single moms I know have had to move in with other people. Thanks for reading!