From an economic standpoint, it makes sense for the federal government to grant eye-watering contracts to stimulate the economy because the eventual returns as tax revenue will dwarf the initial investment. However, that argument is moot if the taxes aren't collected on the other side. SpaceX has paid little to no federal income tax since its founding in 2022, despite receiving over $22 billion from Washington. Elon Musk's private space company is taking advantage of a legal tax benefit that was dramatically expanded during President Donald Trump's first term.
SpaceX's tax benefit of choice is the net operating loss carryforward. To oversimplify the tax code, a company can deduct losses from previous years from future profits. It can incentivize startup businesses to rack up losses and avoid profitability. According to the New York Times, SpaceX told its investors that the company may never have to pay any federal income taxes. Musk's house of exploding rockets and telescope-blinding satellites piled up $5.4 billion in losses by the end of 2021.
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SpaceX Might Never Pay Federal Taxes
You might be wondering why there isn't a deadline to utilize the carryforwards. Well, there used to be. The tax cuts enacted by President Trump in 2017 eliminated a 20-year limit on tax-loss carryforwards. It meant that any loss reported after that point could be carried forward indefinitely. It's estimated that SpaceX has $3 billion in losses after the policy change to offset taxes. That's on top of over $1.1 billion in tax credits.
SpaceX is finally reaching the point where its financial success should be benefiting the American people. Instead, the private company's windfall will exclusively line the pockets of Musk and other investors. Musk himself took to his social media platform in June to brag that SpaceX's revenue will be $15.5 billion this year. The corporate tax rate set by President Trump in 2017 is a flat 21%, so SpaceX is legally avoiding $3.25 billion tax bill. If Musk were so concerned about the federal budget that he publicly fell out with Trump over it, he should be lobbying to revert to a 1950s tax code.
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