Elon Musk Calls for Major Tax Reform to Spur Economic Growth

Elon Musk, the billionaire who now calls Texas home and is close to President-elect Donald Trump, is calling for tax reform to spur economic growth.

On his social media platform X, formerly known as Twitter, the billionaire entrepreneur behind SpaceX, Tesla, and other endeavors made a post that has him trending--and not just on X.

Musk has suggested a major overhaul of the American tax system, suggesting the U.S. should begin to transition to a tax structure based on consumption-based tax or a flat tax. Musk posted on X that 'taxes should be easy to understand and fair.'

He added that this change would make the tax code easier to understand, and more efficient, encourage economic growth, and eliminate tax loopholes.

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What do critics have to say in response to Musk's suggestions for changing the U.S. tax code?

Critics of Musk's comments regarding making drastic changes to the tax code shared concerns that a flat tax would disproportionately benefit high-income earners. At the same time, lower- and middle-income households would suffer from the changes, they said.

For those unfamiliar with a flat tax system, it is a single-rate system in which everybody, regardless of household income, pays the same percentage. Those in favor of the flat tax system, like Elon Musk, believe this system makes our tax system more 'transparent' and reduces what is perceived to be unnecessary costs.

Musk also mentioned he likes a consumption-based tax system. What does that mean?

Consumption taxes are levied on goods and services. You've probably heard the national sales tax discussion. That's an example of this. Proponents say this type of tax code would incentivize people to save and invest their money, rather than spend so much.

Given that Musk has become even more of a high-profile person with his close affiliation with Donald Trump, his comments sparked debate in various political and economic groups.

Those in favor of these potential changes like the idea that it could reduce tax evasion and encourage innovation. Those opposed are concerned that consumption taxes, for example, would continue to widen the wealth gap.

For more perspectives, both in support and opposition, on the issue, you can take a look at CNBC's analysis of flat tax systems and Forbes' report on Musk's tax contributions.

Also, take a look at this YouTube video from the Forbes YouTube page: Memo to Musk and Ramaswamy--Go for the flat tax.