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Tesla CEO Elon Musk has informed family and friends he’s shifting from California to Texas, CNBC reported on Friday.
The information doesn’t come out of nowhere. In Could, Musk introduced he deliberate to promote all of his California properties, together with his Bel Air mansion. And that very same month he flirted on Twitter with the idea of moving Tesla’s California headquarters to either Nevada or Texas—a call he mentioned would come right down to how “Tesla is handled sooner or later” by the state.
Musk is reportedly contemplating Austin. Whereas one thing of a tech hub, Austin pales compared to his present residence in California.
So why precisely would a tech CEO go away California? Good ole dollars.
Musk has a internet value of $139 billion, second globally to Amazon founder Jeff Bezos. That wealth is essentially in Tesla shares, which have climbed over 1,000% since July 2019—a feat that helped him earn the title of Fortune’s Businessperson of the 12 months. And as Musk begins to faucet into that paper wealth, he’ll be required to pay California’s prime capital beneficial properties tax price of 13.3%—along with the highest federal capital beneficial properties price of 20%.
However as soon as Musk establishes Texas residency, he ought to be capable to keep away from state capital beneficial properties altogether. Not solely does the Lone Star State not impose revenue taxes, it’s among the many 9 states with out capital beneficial properties taxes.
The tax financial savings might be astronomical. Based on Bloomberg’s calculation of SEC filings, Musk owns the equal of $135 billion in Tesla shares and choices as of Thursday. If he executed the choices and bought all ensuing shares at their present buying and selling worth of $599.04, he may owe California as a lot as $18 billion in capital beneficial properties taxes primarily based on a tough calculation—assuming most of Musk’s fairness stake was granted to him moderately than bought. If he lived in Texas, he’d dodge that whole potential tax invoice. For perspective, all the market cap of Domino’s Pizza is $15.1 billion.
And people Texas tax financial savings may entice Musk to promote a few of his Tesla shares to pay down his large debt: Over half of his fairness stake in Tesla is collateral to his private debt, in accordance with Tesla’s most up-to-date SEC submitting.
Over the previous yr quite a lot of California-based enterprise leaders and companies have mentioned they’re going to flee the state for tax-friendly havens. That features people like comic Joe Rogan and enterprise capitalist Keith Rabois. Moreover, Fortune 500 companies like CBRE Group, Charles Schwab, and Hewlett Packard Enterprise have all introduced strikes from California to Texas.
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