Trillionaires are creatures of the tax code. If they paid taxes like working people, we wouldn’t have any.
While valuations fluctuate, one fact remains clear: Elon Musk became the planet’s first trillionaire this summer. At SpaceX’s IPO peak, he was momentarily valued at about $1.45 trillion.
SpaceX’s stock experienced sharp declines and rebounds, but the key issue isn’t whether Musk’s net worth remains above a trillion dollars — it’s that 94 percent of it stems from avoiding taxes on unrealized gains.
Indeed, Musk’s wealth largely results from not paying taxes.
It’s no exaggeration to describe trillionaires (and Musk is unlikely the last) as products of the tax laws. They could be called “taxillionaires.” Without laws allowing the rich to indefinitely defer taxes by keeping their profits unrealized, trillionaires wouldn’t exist — and billionaires would be far fewer.
Musk recounts selling his PayPal shares in 2002 and earning $180 million, which he reinvested into SpaceX and Tesla, borrowing money to cover living costs. Growing $180 million to a trillion now implies yearly returns surpassing 40 percent—returns considered unattainable for average investors.
Compounding these returns without tax obligations accelerates wealth growth dramatically.
Musk has paid some taxes, triggered when exercising stock options or selling Tesla shares, but these are negligible compared to his total fortune. Most working Americans surrender roughly 40 percent of their income to combined federal and state taxes.
While workers can allocate limited amounts into tax-deferred accounts like IRAs or 401(k)s, most savings come from after-tax income diminished by federal, state, local, Social Security, unemployment, and Medicare deductions. Musk, however, largely avoids these taxes.
But this exemption isn’t necessary.
Imagine Musk faced the same tax rates on his annual gains as many high earners do, forced to sell Tesla and SpaceX shares to cover taxes. Our calculations using recent data estimate his net worth would stand near $47 billion — an immense fortune but far from a trillion, and less than the GDP of numerous nations.
The same holds true for Jeff Bezos, Warren Buffett, and other multibillionaires.
The majority of their wealth arises from avoiding taxes on gains. Absent perpetual tax deferral, their wealth would shrink to a fraction of its current size (still substantial). As it stands, nothing impedes them from leveraging their riches for personal advantage.
During the 2024 elections, Musk emerged as the top campaign contributor by donating $291 million. Though minor relative to his net worth, this secured exceptional influence: lucrative contracts, a halt to investigations, privileged access to government data, and power to dissolve government initiatives — including foreign aid cuts expected to cause over 14 million preventable deaths.
This creates a troubling cycle where vast wealth translates into power, which then generates more wealth, diverting resources away from those in need. Private ultra-rich individuals control unprecedented influence.
We can limit their dominance by addressing untaxed wealth accumulation. It’s time to stop subsidizing billionaires and trillionaires’ power growth via tax avoidance. Implementing fair measures like the Billionaires Minimum Income Tax Act, proposed in Congress in 2023, is a step forward.
In the coming decade, we will confront critical national debt and unmet demands for healthcare and retirement support. We must choose whether to leave vast billionaire and trillionaire fortunes untouched or tax them similarly to others to reduce their sway and fund public needs. The decision lies with us.
Original article: otherwords.org
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