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Tax arbitrage means using the difference in tax rates to make extra money. If the tax rate when you contribute to a tax-deferred investment account is higher th
by rada 16y ago
Tax arbitrage means using the difference in tax rates to make extra money. If the tax rate when you contribute to a tax-deferred investment account is higher than the tax rate when you pull the money out, voila, you've profited from tax arbitrage. So I am not sure why you are thinking of income vs. other taxes. The authors are simply saying, if you are a high earner in a top federal tax bracket, it really pays to put money into tax-deferred investments.
- deleted 16y ago[deleted]
- kenjackson 16y agoOK, I thought the takeaways were implying that you were finding some inefficiency in the system. Rather they were simply saying that retirement accounts work as advertised. Just an odd takeaway, since that's the expressly stated purpose of most retirement accounts. But fair enough.
- deleted 16y ago[deleted]
- bmcleod 16y agoThe strange thing here is that retirement accounts with a tax deferment policy benefit the higher earners much more than they benefit people in lower tax brackets. This isn't very consistent when the social issue that has really driven these polices into existence is trying to convince lower earners to save for retirement so that the state doesn't have a huge outgoing on pensions etc.