"Capital Markets Are Over" - The Billionaire Tax Controversy Sparked by Musk

Harvard Professor Warns of Side Effects in WSJ Op-Ed
Bloomberg: "Billionaire Tax Controversy Spreads"
"Analyzed as Used Ahead of Stock Option Exercise"
Tesla Stock Falls 4.9% After Share Sale Survey

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Elon Musk, CEO of Tesla, has succeeded in bringing the controversy over the billionaire tax into the capital market. As investors and the market responded to his unprecedented move of conducting a survey on Twitter about whether to sell his shares, conflicts between the political sphere and market participants over the billionaire tax are expected in the future.

Hal Scott, a professor at Harvard Law School, argued in an op-ed published in the Wall Street Journal (WSJ) on the 8th (local time) that the billionaire tax could destroy the capital market. He predicted that most founders would delist their companies if the billionaire tax were imposed. Since the billionaire tax applies only to shareholders of publicly listed companies, he claimed there would be no reason to maintain a public listing while bearing enormous taxes.

Professor Scott presented the logic that investment in publicly listed companies would naturally decrease. He also argued that unicorn companies invested in by venture capital would lose the incentive to go public. He diagnosed that the billionaire tax could seriously affect the structure of the U.S. investment ecosystem, where private equity and venture capital investments dominate compared to public offerings.

Scott pointed out that the billionaire tax, which taxes unrealized capital gains, could put an end to the long-term recovery of the U.S. economy. In particular, he forecasted that if billionaires sell their shares to pay taxes, stock prices would fall, seriously impacting the retirement pensions of American taxpayers.

Scott’s argument was also proven in the stock market. On that day, Tesla’s stock price closed down 4.9% compared to the previous day. This happened after 58% of respondents agreed in a survey Musk conducted asking whether he should sell 10% of his Tesla shares to pay the billionaire tax he would owe. Musk may have sent a warning about the billionaire tax by creating a situation where the stock price fell due to selling pressure from a major shareholder.

Bloomberg also evaluated that Musk ignited debates through Twitter on △tax policies on billionaires △corporate compensation for employees △policy authorities’ efforts to resolve inequality △and the influence individuals have in the democratized digital finance era.

Some investors agreed with Musk’s position. Investor Leo Koguan, who supported Musk’s share sale, argued that Musk has no cash and therefore has no way to pay taxes other than selling shares.

The political sphere showed clear displeasure. Senator Ron Wyden, a Democrat who proposed the bill, countered, “The world’s richest person should not use Twitter survey results to decide whether to pay any taxes. Billionaires must pay income tax.”

Michael Hiltzik, a Pulitzer Prize-winning columnist, wrote in an LA Times op-ed, “Musk is trying to manipulate public opinion to fill his own pockets. His actions are the best evidence that the billionaire tax is desperately needed.”

Some argue that Musk is using the current situation ahead of a situation where he must sell Tesla shares.

There is also growing analysis that this is to criticize income tax. Musk’s 22.86 million Tesla stock options granted in 2012 can be exercised in August next year. CNBC predicted that Musk would have to pay about $15 billion in taxes to exercise the stock options, so he would have no choice but to sell some Tesla shares.

This content was produced with the assistance of AI translation services.