Here’s how much items would cost if he paid the same share of his wealth as the median U.S. family
Here is something Elon Musk does not do: He does not compare prices of apples in the supermarket. Because when you’re worth almost $200 billion, the difference between cheap apples and expensive apples is beyond meaningless. We’re talking about a guy whose wealth rose $13.6 billion in a single day. According to Bloomberg’s Rich list, the chief executive officer of electric-vehicle maker Tesla Inc. is now the world’s wealthiest person, with a net worth of $194.8 billion, surpassing Jeffrey Bezos of Amazon.com Inc.
But as a thought experiment, imagine that Musk had to pay for stuff in proportion to his wealth. His net worth is approximately 1.6 million times that of the median American family, which was $121,700 in 2019, according to the Federal Reserve’s Survey of Consumer Finances. So anything costing the median family $1 would cost him $1.6 million.
Let’s say he goes to Whole Foods, which is owned by Amazon. Organic Honeycrisp apples are going for $3.99 a pound. Musk puts his pound of Honeycrisps on the conveyor belt in the checkout line. The cashier says, “That’ll be $6.4 million.” Ouch. He could have bought a pound of organic Fuji apples instead and saved more than $2 million.
One large Hass avocado: That’ll be $2.4 million, please.
These organic strawberries look scrumptious, but $11 million a pound? That’s crazy!
Four pounds of beef ribeye steak come to almost $100 million. By now, Musk is getting steamed at fellow gazillionaire Bezos, muttering, “No wonder they call this place Whole Paycheck.”
The windfall from such a pricing system would go to Amazon rather than the Internal Revenue Service. The closest you could get to something like this with the tax code, in concept anyway, would be a cash-flow tax. The government adds up your income, subtracts the money you put into savings, calls the remainder consumption, and taxes it at a progressive rate: The more you consume, the higher rate per dollar of consumption. The Congressional Research Service included the cash-flow tax in a 2016 review of options (PDF).
A cash-flow tax rate would never be set at 1.6 million times the value of the good, but even a much lower tax would be enough to take a bite out of billionaires’ effective wealth. And it could be simpler to implement than a wealth tax, because income and savings are easier to measure than wealth. Wouldn’t billionaires be able to dodge it by saving rather than consuming most of their income? Yes, and they surely would. But as Boston University economist Laurence Kotlikoff likes to point out, wealth is useful only when it’s consumed, either by this generation or a future one. So over the long run, a permanent 25% tax on consumption has exactly the same effect on a rich family as a one-time 25% tax on its wealth.
How do you like them apples, Elon?