In The Daily Economy, Paul Mueller, a Senior Research Fellow at the American Institute for Economic Research, discusses the rising and falling wealth of Elon Musk, who lost as much paper wealth in four weeks as “an amount nearly equal to the combined fortunes of Jeff Bezos and Mark Zuckerberg.”
The man is still incredibly wealthy. But his wealth on paper declined by more than half a trillion dollars in less than two months. For comparison, the next wealthiest individuals in the world are Larry Page (~$290 billion) and Sergey Brin (~$267.5 billion). So Elon has already “lost” nearly as much as the next two wealthiest people in history have made combined. But is SpaceX really half as valuable today as it was a month ago? No, investors have simply reassessed its value.
This volatility exposes why a wealth tax would be disastrous. It taxes money that doesn’t exist and may never materialize. Every $1 move in SpaceX share price shifts Musk’s paper net worth by $5 billion. A 5-percent wealth tax levied at peak valuation would have hit Musk with a $55 billion tax bill. Today, that same 5-percent tax equals $27 billion — leaving him on the hook for $28 billion in taxes on wealth that vanished into thin air.
Paying that kind of tax is not easy, even for someone like Elon. He would have to sell huge numbers of shares to cover the liability — and he would then have to pay additional taxes on those sales. Meanwhile, ordinary investors holding shares in those companies would watch the price of their shares plummet. Even many folks who want billionaires to pay more taxes shy away from wealth taxes.
Action Line: It’s easy to see that taxing momentary paper gains is dangerous, but that’s what many radical politicians want to do. The disruption it could cause to the economy is unknowable, and potentially vast. Read more about wealth taxes in America below. And click here to subscribe to my free monthly Survive & Thrive letter.
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- Wealth Tax Fairytales: There Are No Dragons
- Wealth Taxes Won’t Stop at Billionaires
- California Wealth Tax: The Damage Done
- Exit and Wealth Tax Proposals Proliferate
- Can the Supreme Court Stop Wealth Taxes Before They Start?
- CA Wealth Tax: “Immediate and Significant Consequences”
- Here’s Why Warren’s Wealth Tax Won’t Work
- Bernie Sander’s 8% Wealth Tax is Coming for Your Money
