The richest men in the world will enjoy the tax benefit for developing their projects in economically difficult areas of Texas, Alabama, California and New Mexico.
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Jeff Bezos and Elon Musk , who are ranked first and second among the richest men in the world, have an extra financial boost. Its space projects enjoy a tax exemption from the United States federal government. The benefit is part of a program that aims to attract investment and jobs to distressed communities.
For nearly a decade, the pair of moguls have invested millions to develop engines and rockets with their private space companies: Bezos’s Blue Origin and Musk’s SpaceX. The companies pledged to create jobs in designated areas in exchange for local tax breaks.
The benefit, which had not been disclosed until now, allows them to avoid capital gains taxes on the money they put into those opportunity zones. Those investments can grow tax-free as long as they keep your investments in place for a decade .
Also the millionaire Sir Richard Branson , number 379 in the list of global wealth of Bloomberg, will take advantage of this tax exception. The Briton joined the space race through Virgin Galactic , a public company that operates from California and New Mexico , sites included in the program.
Reviews and results
The government program has received various criticisms. Some believe that it should have been invested in existing companies, instead of attracting new investment to impoverished areas.
“It would be a great misuse of scarce resources to subsidize billionaires to go into space, when there are people struggling with real problems here on earth,” said Brett Theodos, a community development expert who has studied the program for the Urban Institute in statements collected by El Financiero .
Another controversial point is that companies are not required to disclose whether they are claiming the tax exemption or to document job creation. The lack of transparency regarding how the areas were selected is also claimed, as it is speculated that it responded to political reasons and not economic necessity.
Nonetheless, Musk’s SpaceX launch site in Boca Chica Village , a settlement in the southern tip of Texas, has generated 500 jobs for the region since 2014 , according to a local space development official. The Tesla CEO said this week that he moved to Texas to be closer to SpaceX operations.
In the case of Bezos’ Blue Origin , it was established at Cummings Research Park in Huntsville, Alabama. The research park, known as “Rocket City,” includes new technology companies and university labs, and is close to NASA’s Marshall Space Center. Alabama officials made it more attractive by giving Blue Origin $ 16 million in incentives. The company has said that at peak production, the rocket plant could employ 400 people.
Branson’s Virgin Galactic is building its so-called SpaceShipTwo at the Mojave, California air and space port. It is a civilian test facility that houses several aerospace companies and is part of a designated opportunity zone.
Virgin Galactic announced this year that it would operate space tourism flights from Spaceport America , a luxurious launch field and terminal in New Mexico. That operation is expected to create about 200 jobs , state economic development officials said. In documents filed with the Securities and Exchange Commission, he indicates that he has not yet paid federal taxes because he has not started receiving passengers or payments, and he has not made a profit.
Branson plans to be Spaceport America’s first passenger early next year. Hundreds of people have already reserved their place for the suborbital flight with a deposit of 250 thousand dollars. Virgin Galactic has said it expects to be profitable in 2021 and its annual revenue is estimated to exceed $ 1 billion in just a few years.
For his part, the president-elect Biden has vowed to continue while asking investors to show that the projects benefit the community.
With information from El Financiero .