October 29, 2024
Why is Elon Musk Supporting Trump? Tax Avoidance
Bob Lord
Elon Musk, the New York Times reports, has gone all in for Donald Trump. His pro-Trump America PAC, has already spent $118 million and has the budget to spend tens of millions more, almost all of that coming from Musk himself.
Musk has based his efforts on Trump’s behalf in Pennsylvania, the state he sees as the election’s lynchpin. He’s even talking about going door-to-door himself. And Musk, of course, is also spreading election misinformation on X, the former Twitter, at a furious pace.
Quite an about-face for someone who in 2020 voted for Biden and called Trump in private conversations a “stone-cold loser.” The reasons for that 180-degree about-face? Musk is claiming that Democrats are trying to “fill the country with undocumented immigrants.” Humanity, he adds, “will never reach Mars” unless Trump triumphs.
Reasons like these amount to pure rationalization. The one and only real reason Musk supports Trump: how much he’ll save in federal taxes if Trump triumphs. How can we be so sure? The timeline on Musk’s turn from Trump skeptic to Trump champion leaves no doubt when and why Musk’s political stance so abruptly and radically changed.
Back in 2021, less than a year after Musk cast his vote for Biden, House Democrats passed the Biden-backed Build Back Better budget package. That legislation included an 8 percent surtax on incomes over $25 million.
Over in the Senate, Finance Committee chair Ron Wyden would soon add into the 2021 legislative tax mix a proposal, the Billionaire Income Tax, that would require the nation’s billionaires to pay tax on their investment gains as they accrued. A few months later, the Biden administration announced its own take ox taxing the super rich, the Billionaire Minimum Income Tax.
Both these Wyden and the Biden proposals aimed to close the longstanding “buy-borrow-die” tax loophole that billionaires so love to exploit. This loophole allows billionaires to hold assets for their entire lifetimes without paying tax on the gains, while borrowing against the assets whenever they need cash. Upon death, their untaxed gains vanish for income tax purposes. Musk’s history of borrowing against his Tesla shares indicates clearly that he understands just how lucrative the buy-borrow-die loophole can be.
The 2021 congressional tax deliberations left Musk in a tight spot tax-wise. He held options to purchase additional Tesla shares set to expire in 2022. These options carried an exercise price at just a fraction of the then current Tesla share trading price. A billionaire in Musk’s position would ordinarily wait on exercising these options — and realizing a huge windfall — until just before the options were going to expire.
But by that time, in 2022, the House-passed 8 percent surtax on income over $25 million might be law. If Musk waited until 2022 to exercise his options, his windfall could face a huge new tax liability.
This reality meant that Musk had no rational alternative other than to go ahead and exercise his options in the fall of 2021, before the new surtax went into effect, in the process triggering an $11-billion federal income tax bill for the year.
So Musk did just that and tried to spin the outcome to burnish his public image. He purported to leave the decision on whether he should sell 10 percent of his Tesla stake to his Twitter followers. And he used his resulting 2021 tax bill to win a Twitter warwith lawmakers like Senator Elizabeth Warren who had been pointing out how little Musk had been paying in federal taxes over prior years. In 2018, as ProPublica had reported, Musk paid zero in federal income tax while watching his wealth increase by billions.
Musk didn’t just spin his 2021 tax payments in the court of public opinion. He also began attacking Senator Wyden’s proposal to tax billionaire investment gains, warning his Twitter followers that after politicians ran out of tax dollars they collect from him and his fellow billionaires, they would “come for you.”
The federal government, Musk complained, was simply wasting too much money. If he paid less in taxes, Musk pronounced, he would “use the money to get humanity to Mars,” a pledge that might explain Musk’s recent assertion that humanity will never reach Mars without Trump — and his tax cuts for billionaires.
In January 2022, after his Tesla share sale, Musk began accumulating shares in Twitter, the social media platform most connected to politics and public opinion. By April 2022, he had become Twitter’s largest shareholder, owning over 9 percent of the company’s shares. That same month, he offered to buy Twitter outright for $54.20 per share. In October 2022, he closed on the Twitter purchase.
Back in the previous spring, at the same time he was buying Twitter, Musk and his followers were using that platform to contend that SpaceX and Tesla would never have survived if Biden’s Billionaire Minimum Income Tax proposal had been the law of the land in 2008.
Musk in 2022 also began making multi-million dollar contributions to Republican causes. These contributions have only recently come to light. They included $50 million for Citizens for Sanity, a group tied to Trump adviser Stephen Miller. Citizens for Sanity used the funding to run attack ads against Democrats in the 2022 midterm election.
Musk that same year made contributions to another Republican group, Building America’s Future. The exact size of those contributions remains unknown, but we do know that the group’s revenue rose by $42 million between 2021 and 2022.
The year 2023 would bring still more Musk political involvement, most notably a $10 million contribution to the presidential campaign of Ron DeSantis.
Behind these contributions, some simple math. Musk prioritizes the accumulation of wealth over all else and deeply disdains paying tax.
By early 2022, Musk had come to see the Democratic Party as a direct threat to his continued favorable tax treatment and the future of his massive fortune. The House had passed an 8 percent surtax on huge incomes. The Senate had before it legislation to eliminate the billionaire buy-borrow-die loophole. In response, Musk would begin using his wealth and Twitter to turn public opinion against the Democratic Party and its tax proposals — and help Republican candidates in election contests.
In other words, Musk began following the practice of most of his fellow billionaires. Like them, he would go on to dedicate big bucks to Trump and other Republicans.
These billionaires are, as always, placing self over country. Like their German counterparts in the 1930s, their lust for wealth blinds them. Their addiction to wealth accumulation overpowers any other course. We need, now more than ever, to stand up against them.
Bob Lord is a veteran tax lawyer who practices and blogs in Phoenix, Arizona. He’s an associate fellow of the Institute for Policy Studies.
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