Elon Musk’s Tesla stock sales are designed for maximum taxation

The past week has seen Elon Musk offload his Tesla shares in a steady stream, resulting in some of the company’s supporters wondering why the CEO appears to be bleeding out his sales of TSLA stock over a period of time. As explained by Musk recently on Twitter, however, his low basis share sale rate is designed to be closer to maximum taxation. 

Musk’s strategy was observed by Tesla retail investor and YouTube host Dave Lee, who noted that it’s possible that the CEO was selling existing common TSLA shares to increase the taxes he would be paying the government. This is certainly an unorthodox move, but it is something that is just crazy *enough* to be characteristic of Elon Musk.

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

Sure enough, Musk responded to this message, noting that he really is going for maximum taxation. “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,” Musk wrote. 

The reasons behind Musk’s decision to maximize his taxes on his recent Tesla share sales have not been fully disclosed by the CEO so far, though it seems to be partly a response to the allegations that he is trying to avoid paying taxes. The amount of income taxes that Musk has paid over the years has been heavily criticized in recent months, especially as the CEO’s net worth rose with Tesla stock’s rally.

A rigged economy is Elon Musk and Jeff Bezos becoming $408 billion richer during the pandemic while, in a given year, paying nothing in federal income taxes. Yes, we must demand that the wealthy pay their fair share of taxes and finally create an economy that works for all of us.

— Bernie Sanders (@SenSanders) November 8, 2021

This was extremely evident on Twitter, with critics such as Senator Bernie Sanders and former Secretary of Labor Robert Reich running with the narrative that Musk was exploiting the system since he is avoiding paying income taxes despite his rising net worth. This was despite Musk highlighting that he could really only pay taxes if he sells Tesla stock, which he is doing now. Quite unsurprisingly, Musk critics still have complaints about his recent decision to sell TSLA stock.

Elon Musk's wealth has surpassed $200 billion.

It would take the median U.S. worker over 4 million years to make that much.

Meanwhile, Musk pays less in federal income taxes than the median U.S. worker.

Does this seem fair to you?

— Robert Reich (@RBReich) November 7, 2021

Despite the criticism, however, one might find it quite challenging to dislike Musk’s tax maximization strategy. It would be pretty difficult to argue that the CEO dodges taxes, after all, when he pays massive amounts after selling Tesla stock. And considering Musk’s penchant for starting trends, perhaps other billionaires might even follow suit.