Electronic tax

Democrats respond to Musk’s Twitter buyout with another wealth tax push

DDemocrats are seizing on Elon Musk’s $44 billion purchase of Twitter as proof that the country’s wealthiest people are being taxed too little.

Musk said he was buying the social media giant to take it private and revamp its speech management. Some on the right have welcomed the move, but some on the left are using the moment to push to tax it.

“This agreement is dangerous for our democracy. Billionaires like Elon Musk play by a different set of rules than everyone else, hoarding power for their own gain. We need a wealth tax and tough rules to hold Big Tech accountable,” Senator Elizabeth Warren said on the platform after Twitter’s board announced it would accept the offer. by Musk.

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While a wealth tax is not actively considered by lawmakers and unlikely to pass an evenly divided Senate, some of the most liberal politicians, such as Warren and Socialist Senator Bernie Sanders of Vermont, advocated a form of tax that not only affects the wealthiest people’s annual incomes, but also their net worth.

Warren wasn’t the only one to criticize the purchase. Democratic Rep. Pramila Jayapal of Washington claimed Musk paid “an effective tax rate” of just 3.27% from 2014 to 2018. She compared that to the average family, which she says pays about 13% on average.

“It is time for a wealth tax in this country,” Jayapal proclaimed.

Jayapal’s claim that Musk only paid 3.27% in taxes is inaccurate and appears to stem from what ProPublica defined as a “true tax rate” in his stories on the thousands of pages of leaked tax documents he received.

The tax dodging was big news and sparked debate over a wealth tax when the story first broke last year.

Musk was among those whose tax documents ProPublica received and written. He calculated his “effective tax rate” by comparing the amount of taxes the 25 richest people in the United States paid each year to how much Forbes felt that their wealth had increased over this same period.

So the 3.27% figure is so low because it includes Musk’s unrealized capital gains, which are, by definition, not income and are not taxed until they are realized.

Representative Bonnie Watson Coleman, a Democrat from New Jersey, pointed out that Musk’s massive cash offer to buy Twitter is only 17% of his net worth.

“Billionaires like Musk pay lower tax rates than firefighters, teachers and nurses. If that sounds absurd, that’s because it is,” she said. a minimum income tax for billionaires.

Although Musk is the richest person in the world, worth around $242 billion as of Tuesday, much of his net worth comes from his investments and holdings rather than his cash wealth. He currently holds approximately $3 billion in cash and illiquid assets, based on an estimate of Bloomberg.

While a wealth tax is unlikely to materialize in the near future, some Democrats have recently pushed to raise more revenue from the wealthy through various proposals tied to President Joe Biden’s spending agenda, much of which now appears dead in the water.

Last year, Senator Ron Wyden, who has been a strong advocate of mark-to-market accounting for the taxation of assets held by the wealthy, proposed a 23.8% annual capital gains tax. latent billionaires as a way to pay for democratic climate change. and social expenditure legislation. The Oregon Democrat’s proposal was quickly voted down in favor of a plan to impose a surtax on those earning more than $10 million (which also failed).

Following the proposal, Musk weighed in on the matter. The Tesla founder polled his Twitter followers on whether he should sell more than $20 billion worth of Tesla stock in response to the senator’s push to tax the unrealized capital gains of billionaires.

“Whether or not the richest man in the world pays taxes shouldn’t depend on the results of a Twitter poll. It’s time for the billionaires’ income tax,” the senator said in response to Musk’s informal poll.

The plan to tax billionaires’ unrealized gains has also faced awkward questions about reporting losses.

For example, if one of the richest people in the world is having a bad year financially, under a billionaire tax, the government might end up having to provide some form of tax refund. The optics of taxpayers subsidizing billionaires would likely lead to popular resentment.

“If you’re worried about the optics of billionaires not paying taxes on unrealized gains, what will it look like if they potentially get refunds for losses from the government during a recession?” Garrett Watson, senior policy analyst at the Tax Foundation, told the Washington Examiner when the proposal was debated.

Last year, Musk ended up selling a large volume of Tesla stock, including about $1 billion from the company in late December. The move came as Musk faced perhaps the biggest tax bill in US history, with his federal and California income taxes combined. valued to hit $11 billion, according to CNBC.

Twitter’s board accepted Musk’s offer to buy the company on Monday after working to resist a takeover.

Musk agreed to buy the stock at $54.20 per share – a 38% premium to the closing price the day before news broke that Musk had bought 9.6% of the company and an increase of 18% over the closing price before the proposed purchase. announcement.

The Tesla and SpaceX founder stressed his desire to support democracy and free speech after the deal was struck.

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“Free speech is the foundation of a functioning democracy, and Twitter is the digital public square where issues vital to the future of humanity are debated,” Musk said in a statement. statement Monday.

“I also want to make Twitter better than ever by enhancing the product with new features, making algorithms open source to increase trust, defeating spambots, and authenticating all humans,” he continued. “Twitter has enormous potential – I look forward to working with the company and the user community to unlock it.”