Elon Musk is on track to become a trillionaire by 2027. Here’s why the rich keep getting richer

Elon Musk is on track to become the world’s first trillionaire by 2027, according to a recent report from Informa Connect Academy.

Of the world’s billionaires, Musk is the closest to that 13-figure mark, and his wealth is growing.

At the start of 2020, Musk was worth about $US28.5 billion ($42.4b), according to the Bloomberg Billionaires Index. By the end of that year, he was worth around $167b ($248.4b), and as of September, his net worth was valued at roughly $265b ($394.2b) according to the index.

The biggest driver of Musk’s wealth has been Tesla stock, which rallied during the Covid-19 pandemic. Tesla stock was hovering around $US30 ($44.63) per share in January 2020. By January 2021, the stock had surged to almost $US300 ($446.34 per share).

“If you look at the list of the richest Americans, whether we’re talking about Elon Musk or Jeff Bezos, the reason people get super rich is they start a company and they grow that company,” said James Pethokoukis, economic policy analyst for the American Enterprise Institute.

“And the reason that company keeps growing and growing is [it’s] producing something valuable that people want,” Mr Pethokoukis added.

Wealthier individuals typically have larger portions of their assets invested in the stock market, while middle-income households tend to have more of their wealth tied up in real estate.

The wealthiest 1 per cent of Americans own nearly 50 per cent of all U.S. stocks, while the bottom 50 per cent of Americans hold about 1 per cent of all stocks, as of mid-2024, according to Federal Reserve data.

About 58 per cent of families owned stock in 2022, either directly or indirectly through passive investments such as retirement accounts.

“Wealth inequality is very much driven by the prices of different types of assets,” said John Sabelhaus, a fellow at the Brookings Institution.

“One of the things that will cause wealth inequality to go up as measured by wealth concentration is the stock market.”

There is also debate over the role of taxation in contributing to wealth inequality. While some, including Mr Pethokoukis, argue large compensation packages are the reward for creating a successful company, others, like Mr Sabelhaus, say loopholes in the tax system create an unlevel playing field.

“Over the past quarter century in particular, changes in tax policy have made it much more difficult to tax the rich,” he said. “There are many more exclusions, many more ways to get around paying taxes.”

Many Americans primarily earn their income by trading their time and skills for a paycheck, which is taxed based on how much the individual earns. On paper, the ultrawealthy’s income is not quite as clear.

“If we think about income as being sort of the improvement in one’s ability to spend over time, you and I have paychecks. And those paychecks measure how much we can spend,” Mr Sabelhaus said.

“Musk … has a gigantic compensation package. But even that package, only a fraction of it shows up as taxable income because much of it is in bonuses and other ways of getting paid that make it easy to avoid taxation.”