Elon Musk’s net worth surged to $1.2 trillion on June 12, making him the world’s first trillionaire after his space exploration company, SpaceX, went public with a valuation exceeding $2 trillion. This significant financial achievement has reignited discussions among some politicians about wealth inequality and the taxation of the wealthiest Americans.
Senator Bernie Sanders, I-Vt., pointed out that Social Security taxes have a cap for high earners. He stated on June 12 via X that a trillionaire like Musk pays the same into Social Security as someone earning $184,500, a situation he described as absurd and in need of reform.
This observation accurately reflects a feature of Social Security taxation. The U.S. government ceases collection of this tax once an individual’s earnings reach a specific threshold. For 2026, this cap is set at $184,500.
While Musk cannot exceed this cap on wages, his financial structure is distinct and heavily reliant on stocks. Consequently, his precise annual Social Security tax liability remains unclear.
For the majority of workers, Social Security and Medicare taxes are deducted directly from their paychecks. Both employees and employers contribute 6.2% of the employee’s income to Social Security, up to the aforementioned cap.
In 2026, the maximum Social Security tax for an individual earning $184,500 or more is $11,439. Self-employed individuals, however, are responsible for the full 12.4% rate, with their Social Security taxes maxing out at $22,878. Importantly, earnings above this maximum do not increase future Social Security benefits, and individuals earning significantly more than the cap, such as $2 million, pay no additional Social Security tax on those higher earnings.
Teresa Ghilarducci, a labor economist and professor, noted that the maximum tax liability is the same for someone earning $184,500 as it is for the wealthiest person in the country.
In contrast, Medicare taxes, another component of payroll taxes, do not have an income cap. Both employees and employers each pay 1.45%, with an additional 0.9% surcharge applied to wages exceeding $200,000 annually.
A spokesperson for Senator Sanders, Jeremy Slevin, clarified that Sanders’ post was intended to advocate for changes outlined in his Social Security Expansion Act. This proposed legislation seeks to remove the cap on Social Security taxes for earnings over $250,000 and to extend the full Social Security payroll tax to other forms of income, including capital gains.
What income is subject to Social Security taxes?
Social Security taxes are levied solely on income categorized as wages, which typically represents a regular paycheck. Bonuses and stock-based compensation, such as stock options or restricted stock units, are subject to these taxes once they are exercised or vest, provided they are classified as wages.
However, income not considered wages, such as capital gains from investments, is not subject to this tax, according to Jessica Riedl, a budget and tax fellow at the Brookings Institution.
Musk’s wealth is largely derived from his stock holdings in Tesla and SpaceX, which also encompasses its subsidiaries Starlink and xAI. When Musk sells these stocks or takes out loans against them, this is not considered wage income and therefore not subject to payroll taxes. Increases in stock value also do not trigger Social Security taxes. The recent substantial increase in Musk’s net worth, from approximately $800 billion to over $1 trillion, was due to SpaceX’s increased valuation upon going public, not from direct compensation.
When does Musk incur Social Security tax obligations?
It is not possible to precisely determine Musk’s total federal payroll tax liability. However, public disclosures offer some insight into his income. Musk does not receive a salary from Tesla, thus incurring no Social Security taxes from that company. A filing from SpaceX before its initial public offering indicated he received a salary of $54,080, which was aligned with California’s minimum wage for exempt employees. Information on his compensation from his private companies, The Boring Company and Neuralink, is not publicly disclosed.
Musk’s significant payroll tax liabilities in recent years have stemmed from exercising stock options that were granted as compensation. In 2021, he exercised a significant option to purchase Tesla stock at a considerably reduced price based on a 2012 compensation package. This resulted in over $20 billion in taxable income. While his income tax for that year was likely over $11 billion, his Social Security tax burden was considerably less due to the income cap. He would have been liable for approximately $8,853, similar to an individual earning that year’s taxable maximum of $142,800.
There is a possibility, as noted by Ghilarducci, that in certain years, Musk could pay even less in Social Security taxes than someone earning the maximum wage. In years where his stock-based compensation does not generate payroll tax obligations, his wage income might be minimal, leading him to contribute less to Social Security than a salaried worker earning $184,500, potentially significantly less.
Conclusion
Senator Sanders stated that Musk "pays the same amount into Social Security as someone making $184,500." Social Security taxes are applied only to earnings up to a specific limit, which is $184,500 in 2026. Therefore, wages exceeding this amount are not taxed, making Sanders’ statement factually correct regarding the tax structure. However, without knowing Musk’s specific wage income for the current year, it’s uncertain whether he will even reach this maximum. It is plausible he could pay less.
The increases in Musk’s net worth are often driven by the appreciation of stock value rather than direct compensation. These unrealized gains are not subject to Social Security taxes.
While Senator Sanders’ statement is accurate regarding the tax system’s cap, it lacks some context. Therefore, it is rated as Mostly True.