Why is Elon Musk paying more taxes than he needs to, reveals Tesla (TSLA) investor

Sweet November is not turning out to be so sweet for Elon Musk as he is facing both criticism and praise for selling his Tesla (TSLA) stock and paying multi-billion dollars in taxes.

On Sunday 7th Nov, the Tesla CEO started a Twitter poll inviting everyone to vote on if he should sell 10% of his Tesla stock. Surprisingly, 57.9% of the total of 3,519,252 votes were in favor of selling his TSLA shares.

As Musk stated in a later tweet that he will abide by the results of this poll, he started selling his TSLA shares the next day. He sold both Tesla common shares and the ones he received as part of his performance package as the CEO of the company.

Till yesterday, Musk sold a total of 1,868,182 of his performance package exercised shares. Interestingly, he sold them in two equal batches of 934,091 on both Mondays after the poll results came in.

For the common shares, Musk has sold a total of 5,427,784 shares as of yesterday. This brings the grand total of sold Tesla shares by Elon Musk to 7,295,966 as of Monday 15th Nov 2021.

Dave Lee, who has been a Tesla investor since 2012 and is also a stock investment analyst with his own YouTube channel and a prominent following on Twitter thinks Musk is paying more taxes than he actually needs to at this time.

Dave explains in the following Twitter thread and podcast that it’s surprising that Elon Musk has chosen to pay a higher amount of taxes rather than opting for a lower number with his pattern of selling TSLA shares.

2. Elon has/had 22.8m shares from options that need to be exercised by 8/22 from his 2012 ceo compensation plan.

Taxes for the 22.8m shares are 37% federal tax + 13.3% california state tax + 3.8% net investment income tax = 54% effective tax rate.

— Dave Lee (@heydave7) November 14, 2021

For the 22.8m options that will be exercised by 8/22 Elon will give the gov’t about $12.7B in taxes (assuming TSLA at $1050).

Assuming Elon exercises the other 100m shares in next 5-10 years and assuming TSLA stock price of $4000, Elon will pay $196B in taxes for those shares.

— Dave Lee (@heydave7) November 14, 2021

Politicians such as @SenSanders and folks like @RBReich should look at the simple math and numbers presented above before trying to scapegoat Elon as not paying his fair share.

Not to mention, tell me another person who is doing more for climate change and space than Elon Musk.

— Dave Lee (@heydave7) November 14, 2021

A careful observer would note that my (low basis) share sale rate significantly exceeds my 10b (high basis) option exercise rate, thus closer to tax maximization than minimization.

— Elon Musk (@elonmusk) November 13, 2021

The Tesla share price did tumble during the last week as Elon Musk started to sell his shares for paying taxes and also probably his loans that he took out for personal expenses. But today, TSLA has started rallying again. As of this writing, a Tesla share is trading at $1,044.86 USD while the market closed at $1,013.39 on Monday yesterday.

Elon Musk also revealed that with time, his ownership of Tesla, Inc. is diluting. There are two main reasons for this dilution, the constant need for capital for growth and every Tesla employee getting stock after working 1 year at the company.

“I had majority control for the first 5 years or so of Tesla, but car companies need lots of capital, so now I’m around 20% or so, despite putting in as much as I could along the way,” he explained in a tweet.

And now Tesla has around 100,000 employees globally and still expanding with Giga Berlin and Giga Texas.

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