Tesla Ceo Elon Musk Calls Elizabeth Warren Karen Over Tax Comments

New York (CNN Business). The Twitter war between Senator Elizabeth Warren and Tesla CEO Elon Muss is raging. Warren called Elon Musk, the world’s richest man, a freeloader because he has paid $0 in income tax in recent years. Musk responded by launching a series personal attacks on Warren, calling her ” Senator Karen “, and claimed that his income tax bill was about to become the largest in US history.

He might be correct, at least in his 2021 tax bill. Warren has advocated for tax increases on the wealthy, recommending that a tax be imposed on all assets of the wealthiest Americans and not just income. Warren complained that Musk should pay more taxes after he was named Time Magazine’s Person of the Year.

She tweeted Tuesday, “Let’s change the rigged tax code so The Person of the Year will actually pay taxes and stop freeloading off everyone else.”

Musk, who has never been afraid to engage in a Twitter battle, responded with a series of insults. “You remind me of when I was a kid and my friend’s angry Mom would just randomly yell at everyone for no reason,”

He said it in one tweet.

According to Forbes’ Real Time Billionaires estimate, Musk is worth $251 billion. However, ProPublica found that Musk and other billionaires paid no taxes in 2018. He had very little taxable income in 2018, as he did not sell any shares of his stock or receive any cash compensation.

However, Musk will be facing a large tax bill this year — something he highlighted in another tweet to Warren.

He tweeted: “And if you opened your eyes for 2 seconds, you would realize I will pay more taxes than any American in history this year,”

Musk has exercised stock options that he was awarded as compensation in 2012. These options vested when Tesla met certain pre-arranged financial targets and operational targets over six years. These options will expire next year. He will lose those options if he doesn’t exercise them by August.

Musk has not yet paid taxes on the value of his shares, but he will soon have to — and it will be a large tax bill.

Because he will have to exercise the options once he has received the shares, less the $6.24 per share exercise price, as income. His bill for those shares will be at the highest federal income tax rate, 37%, plus an additional 3.8% net investment and some undetermined state income tax.

These options could have been available to Musk if he waited until next years. However, if Democrats can pass the Build Back Better bill it could significantly raise Musk’s federal tax bill. While passage is not certain, it could raise Musk’s tax bill by up to 8 percentage points. This is probably why he didn’t exercise his options sooner than he should have.

Musk has already exercised almost 15 million of the 22.9million options that are due to expire. Musk faces a $6.4 billion federal tax bill due to the new shares he acquired. The value of these shares was approximately $15.8 billion. According to his filings with the Securities and Exchange Commission regarding his stock trades, he has sold 6.5million of those newly acquired shares in order to pay the withholding due to the exercise of the options.

Since November, he has been selling shares and exercising options every week. He will likely exercise at least 4 million more options before the end. This could increase his 2020 tax bill by almost $2 billion.

Musk also sold 5.4million shares he held in trust since his 2010 initial public offering. These shares will be subject to a lower long term capital gain rate of 20%. Musk will face an additional $1.2 billion federal tax bill for those sales.

His federal tax bill for 2021 is now at $7.6 Billion, but there’s a chance that it could rise to $10 Billion or more by the end of the year.

Musk would be hit with a wealth tax if it passes

Musk’s net worth is mainly derived from his Tesla holdings, but SpaceX, his private company, has a significant value. Both companies have benefited greatly from US taxpayer support over the years. Tesla received at least $6 billion in tax credits for its electric cars, while SpaceX signed government contracts worth approximately $10 billion.

Warren introduced wealth tax legislation earlier in the year. It would impose a 2 percent tax on individuals’ net worth and trusts with assets greater than $50 million, less than $1billion, and a 33% tax on holdings above $1 billion.

Musk, the world’s richest person, could face a $7.5 billion tax bill if the proposal is passed. This even if he doesn’t trade any stocks next year due to the current value his stock holdings. Tesla shares have increased more than any other stock in the past two years. This means that he could be subject to a tax bill of $7.5 billion if his holdings continue to rise in value. However, the legislation has yet to be passed.

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