Trillionaires Are Only Possible Because They Don't Pay Taxes Like Ordinary People

The valuation trends up and down, but one thing’s for sure: Elon Musk became the world’s first trillionaire this summer. At the height of the SpaceX IPO he was briefly worth around $1.45 trillion.

Then SpaceX stock tanked, rallied, then tanked again. But the most important thing about Musk’s wealth isn’t whether it stays above the 13-figure threshold—it’s that 94% of it comes from not having to pay taxes on unrealized gains.

That’s right: Musk’s fortune effectively comes from not paying taxes.

It’s no exaggeration to say that trillionaires (Musk likely won’t be the last) are creatures of the tax code. They ought to be called “taxillionaires.” If it weren’t for laws that permit the wealthy to endlessly defer paying taxes by keeping their gains unrealized, there would be no trillionaires—and many fewer billionaires.

We should end the practice of funding billionaires’ and trillionaires’ accumulation of power at public expense by letting them amass yet larger fortunes without paying taxes.

According to Musk’s own account, when he sold his stake in Paypal in 2002, he netted $180 million, invested it all in SpaceX and Tesla, and borrowed to pay his living expenses. To get from $180 million to a trillion today implies annual returns of over 40% (returns that would be considered impossible for ordinary investors).

Allowing these returns to compound untaxed supercharges growth.

Musk paid some taxes along the way, when he exercised stock options or sold some Tesla shares, but any taxes he paid are insignificant compared to his wealth. By contrast, for most working Americans earning a good salary, total state and federal taxes are significant—typically around 40%.

They can put limited amounts in tax-deferred IRAs, 401(k) plans, and the like. But most of their savings comes from net paychecks after withholding for federal, state, local, Social Security, unemployment, and Medicare taxes. Musk is effectively exempt from these taxes.

But he doesn’t have to be.

Suppose he were subject to the same taxes on his annual wealth increase that most higher-earning Americans pay on what they make, and had to sell some Tesla and SpaceX shares to pay those taxes. We crunched the numbers based on the latest figures, and found he’d be worth around $47 billion today—rich enough to afford the most lavish lifestyle imaginable, but not a trillionaire, and not richer than the GDP of most countries.

It’s the same story for Jeff Bezos, Warren Buffett, and other multibillionaires.

The vast bulk of their fortunes came from not paying taxes on their wealth as it grew. Without endless tax deferrals, they would have only a tiny fraction of what they own today (although that tiny fraction would still be a huge amount of money). Yet as things stand today, nothing stops them from wielding the power and influence their wealth buys to benefit themselves.

In the 2024 elections, Musk was the largest campaign donor, giving $291 million. That’s chump change for him, but it bought unprecedented power: lucrative contracts, the suspension of investigations of Musk’s businesses, access to government data, and the authority to dismantle government programs—including disruptions to foreign aid which are projected to result in over 14 million people dying from preventable diseases.

It’s a vicious cycle of wealth begetting power which begets more wealth, diverting it from the needy and vulnerable. We’re in the grip of unprecedented power accumulated by private, super-rich individuals.

We can check their power by fixing the untaxed wealth problem. We should end the practice of funding billionaires’ and trillionaires’ accumulation of power at public expense by letting them amass yet larger fortunes without paying taxes. We should adopt sensible policies requiring them to pay their fair share, such as the Billionaires Minimum Income Tax Act introduced in Congress in 2023.

Over the next decade, we will face crisis-level national debt and unmet needs for healthcare and retirement income. That will force us to decide whether to leave the vast pool of billionaire and trillionaire wealth untouched, or tax them like the rest of us to curb their influence and address public needs. The choice is ours.