Can Elon Musk Get Along on $800 Billion?

One of the most contentious issues in California this year doesn’t involve Donald Trump at all. It’s a ballot issue that would levy a one-time 5% tax on residents with $1 billion in net worth.

Proponents estimate that the tax would generate $100 billion in revenue for the state. Opponents claim the state would actually lose money because the wealthy would flee the state and take their jobs and economic impact with them.

The billionaires are gearing up for battle as billionaires can, prepared to dump whatever it takes into a campaign to defeat the wealth tax. And they’re lawyering up for myriad legal challenges.

Here’s how many wealthy Californians would be impacted: 200. Averaging it out, that’s $5 billion each. But some billionaires, of course, have more billions than others.

Billionaire Reactions to the Wealth Tax

Jensen Huang, CEO of Nvidia, for instance, has an estimated net worth of about $160 billion. He would pay a tax of $8 billion. Huang says he has no problem with that.

At the other extreme, Elon Musk, with a net worth now estimated at $800 billion, claims he has moved his residency to Texas, a claim that would be worth California disputing if the ballot measure passes, since his 5% would add up to $42.5 billion. A lot, yes. But with enough of his fortune left to avoid being homeless.

The movement by states to levy a modest tax on extreme wealth seems to be gaining steam.

Massachusetts enacted a “Fair Share Amendment” in 2022. That adds a 4% tax on personal annual income of $1 million. The Institute for Policy Studies (IPS) found that the number of millionaires in Massachusetts actually grew by 39% between 2022 and 2024.

Since 2021, Minnesota has added a 1% tax to investment income more than $1 million.

Washington state taxes long term capital gains beyond $250,000 at 7%.

Capping the Billions: A New Wealth Tax Alternative

I have my own proposal, which I will now make public for the first time. 

Instead of taxing wealth, let’s cap wealth. At, say $5 billion. 

There’s a nice symmetry to that number. My back of the envelope calculations say that if we had capped wealth at $5 billion 10 years ago, $5 trillion would have been added to the U.S. treasury since.  That’s about equal to all current annual U.S. income and payroll tax collections.

How would a wealth cap work? Just as it sounds.

Once a person’s net wealth reaches the $5 billion threshold, every new dollar would be returned to the U.S. Treasury and he or she would pay no other taxes. 

Wouldn’t that kill incentive? For a few, possibly. But fewer than 1,000 Americans have more than $5 billion in net worth. That leaves another 330 million others eligible to grab the brass ring. 

Incidentally, about half of U.S. billionaires got there through inheritance or means other than their self-made efforts. For example, Jim, Alice and Robson Walton, who collectively top out now at about $400 billion, were lucky enough to be born into Sam Walton’s family. Their collective wealth has increased by about $290 billion over the last 10 years. 

The Reality of Billionaire Spending and Wealth Concentration

The word “billion” is fairly meaningless unless you apply it to what it buys.

Let’s say that for some reason YOU just became a multi-billionaire with $5 billion.

Congratulations. And to celebrate you go on a spending spree.

$ A $50 million estate in Beverly Hills

$ A $50 million condo in Manhattan

$ A $10 million getaway in the Hamptons

$  A $25 million vacation home in the south of France

$ A $50 million Gulfstream 550 jet

$ A $200 million yacht

Add $100 million to furnish and equip all these extravagances. And another $100 million for fine art.

Total expense: $585 million. Rounding up to $600 million leaves you with a balance of $4.4  billion.

All of that property generates significant annual expenses, of course.

$100 million to staff and maintain your yacht, plane and properties.

$50 million for insurance and protection services.

Miscellaneous other living expenses? Is $50,000 a month enough?

Since you’re very conservative, you invest your $4 billion+ in U.S. treasury bills and municipal bonds. At an 5% average annual return your investments return enough to pay for your jet-setting lifestyle. 

All that wealth allows you to live work free and cost free. Even better. Your investments all are tax free.

What $5 Billion Actually Buys

There comes a point in wealth accumulation where there’s nothing more you can reasonably buy. What it does buy is more wealth. According to Forbes’ magazine’s current list of billionaires, their collective wealth grew by $2.5 trillion during the last 10 years.

More than 1,000 Americans now are billionaires, twice as many as 10 years ago. Cumulatively, their wealth totals $7.5 trillion. That’s an amount equal to the entire U.S. annual budget—Social Security, defense, debt interest and every other U.S. government expense.

The public’s reaction is not just income and lifestyle envy. What we’re seeing more and more is that such concentration in so few pockets is dangerous.  The ultra rich are buying policymakers and judges, media that affects our political views, policy that lowers taxes for themselves and cuts programs that help others, and technology that’s destroying jobs with no plan or support for displaced workers.

It also buys the ultra rich lawyers and accountants that help them burrow money in offshore accounts and avoid tax bills at home. The Nobel-winning economist Paul Krugman estimates that across all taxes—income, sales, Social Security, Medicare—the ultra-rich pay an average 24% in taxes. Everyone else averages 30%.

From the way voting has been going the past few months, the California billionaires mobilizing to fight the state’s modest one-time wealth tax may regret it. If the level of public anger keeps growing, they may be faced with something more expensive. Like my proposed wealth cap.

Comments? Criticism? Contact Joe Rothstein at jrothstein@rothstein.net

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