Why Does Elon Musk, World’s 2nd Wealthiest Person, Need To Relocate ?

NEW YORK (VINnews) — Benjamin Franklin once remarked that “in this world, nothing is certain except death and taxes.” While some people are trying to cheat the former, wealthy people aim to evade the latter in order to keep their wealth intact.

One might think that the second wealthiest man in the world, Elon Musk, (Only Amazon’s Jeff Bezos is wealthier) should have no issue of saving money. Nevertheless, the CEO of eight companies, including electric car giant Tesla, has told friends and family that he’s moving from California to Texas in order to save state income tax.

The news is no surprise since last May Musk announced that he planned to sell all of his California properties, including his Bel Air mansion. And in the same month he flirted on Twitter with the idea of moving Tesla’s California headquarters to either Nevada or Texas—a decision he said would come down to how “Tesla is treated in the future” by the state.

For the uninitiated, Texas has no state income tax and Tesla & SpaceX CEO’s move to shift to Texas could save him billions of dollars. Last month, Elon Musk surpassed Bill Gates to become the world’s second-richest man. Musk’s net worth soared from $7.2 billion to $145 billion in a single year! The 49-year-old entrepreneur has added more than $100 billion to his net worth since January 2020, making him one of the fastest-growing among the world’s 500 richest people. He is a co-founder of eight companies – Zip2, PayPal, SpaceX, Tesla, Hyperloop, OpenAI, Neuralink, and The Boring Company. The billionaire was granted 101.3 million options, adjusted after a 5-for-1 stock split, this year.

However if he wishes to tap into all of that paper wealth, he’ll be required to pay California’s top capital gains tax rate of 13.3%—in addition to the top federal capital gains rate of 20%. According to Bloomberg’s calculation of SEC filings, Musk owns the equivalent of $135 billion in Tesla shares and options as of Thursday. If he executed the options and sold all ensuing shares at their current trading price of $599.04, he could owe California as much as $18 billion in capital gains taxes based on a rough calculation—assuming most of Musk’s equity stake was granted to him rather than purchased. On the other hand if he lived in Texas, he’d dodge that entire potential tax bill. Even for a billionaire as wealthy as Musk, 18 billion dollars is a hefty amount of money to save.

Moreover those Texas tax savings could entice Musk to sell some of his Tesla shares to pay down his massive debt: Over half of his equity stake in Tesla is collateral to his personal debt, according to Tesla’s most recent SEC filing.

While there is no need to pity Musk for having to relocate, it is a reminder that wealth cannot necessarily buy even the security of a permanent house to live in – and as Franklin observed, even if one can avoid taxes, death is still a certainty.