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I think Mitt Romney famously has a lot in his Roth IRA in a similar way [1]. As others have said, it's not actually illegal so I think pointing fingers at indiv

I think Mitt Romney famously has a lot in his Roth IRA in a similar way [1]. As others have said, it's not actually illegal so I think pointing fingers at individuals who do it (for themselves, their families, etc.) is wrong. If you think it's immoral, go after the people writing the tax codes because 100% if I had the option I would do the same. You'd honestly be a fool to not shelter your millions from taxes if you could. Worst case, you could donate it to the government anyway. Or, donate to a charity of your choice. Or, give it to your kids. Why on Earth wouldn't you legally avoid tax if you could? Also, if you think this should be changed, what should the law be, exactly? You're not allowed to make insane profits in a Roth IRA? Why? Or you're only allowed certain types of investments (like index funds?) in a Roth IRA? In my opinion (and it is an emotional judgement), I think America is based on freedom, and Roth money is money you already paid taxes on, and you should be allowed to invest it however you want. It's your money after all. And I say this as someone who literally only invests in boring index funds myself. [1] https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/ https://www.theatlantic.com/politics/archive/2012/09/whats-r...

nr2x 5y ago
Pointing fingers at it is how you get public attention to the problem, which may lead to demands for change, which is the purpose of accountability journalism in a democracy.
nomoreplease 5y ago
The easiest solution is to cap at a maximum value for Roth (post-tax) purposes. Pick a number ($50M, $100M, $200M), and anything over gets taxed at traditional rates. You can only put in $6,000USD/year into an IRA, so it's absurd for anyone to pretend a return of $1B USD+ is acceptable. $6k/yr for 30 years at a very-high interest rate of 15% results in $31.3M .. so capping Roth-value at $50M will prevent extreme abuse. Though, I suspect many will argue for a lower cap
- Moodles 5y ago
  I think the UK has a similar policy with pensions with a cap around £1m. Not saying it's a good or bad idea as I really havn't studied the economics of it, but other countries definitely do it. Though a UK pension is more like a 401(k) (pre tax) than a Roth (after tax).
colinmhayes 5y ago
>It's not actually illegal Buying assets that you know are being sold for below market value with you IRA is illegal. Thiel sold himself paypal stock for .1 cents per share after he had obtained funding that valued the company far above that. I'm not going to say what he did was illegal because that's for courts to decide, but it certainly seems like the IRS has a case.
Retric 5y ago
It is currently illegal to invest your Roth IRA in companies you are an officer/directer etc. As Peter Thiel was CEO of PayPal copying his investment strategy would be illegal. As to why investing in companies you control like this is illegal, it’s far to easy to manipulate the share price of non public companies which could trivially move unlimited gains into a Roth IRA. However, if you can somehow get 1000x returns without breaking the rules then sure there isn’t a direct cap on how large Roth IRA’s can grow.
- nrmitchi 5y ago
  > It is currently illegal to invest your Roth IRA in companies you are an officer/directer etc. As Peter Thiel was CEO of PayPal copying his investment strategy would be illegal. As far as I know, this hasn't changed; it was not permitted when he did it either. The argument is that all of the activity after this initial prohibited transaction would be impossible to unwind. The typically penalty for things like this is tainting the entire IRA, which just isn't practical at this magnitude.
  - mason55 5y ago
    > which just isn't practical at this magnitude. Why not? If I mess up taxes in my IRA, not only do I have to pay them but I have to pay a penalty. But there's some amount over which it's just too big to figure out so we let it go?
    - nrmitchi 5y ago
      Don't get me wrong, I 100% agree with you that based on the facts, it should happen. But short of siezing all of his still-in-the-US assets, Thiel has $2B-worth-of-reasons to spend decades arguing this in court.
      - Retric 5y ago
        And the USG stands to gain 15% of 5 Billion plus penalties from this. That’s well worth the fight.
harry8 5y ago
This is such a garbage attitude. You'd really do anything, no matter how immoral as long as it's not illegal? I hope we never meet and you have zero influence on my life, the lives of my family, and indeed the human race. Taking an ethical position one way or another regardless of the law as currently written, interpreted and enforced is a really reasonable thing to do. Not taking an ethical view and outsourcing that to current law? You need to defend that. Think of all the obvious examples of utterly heinous behavior that were not illegal when they happened. Most of the very worst were not. Start with the bogeymen of evil. As for tax dodging. FFS if you've got more money than your grandchildren can spend and you still want to not pay a contribution to the society that enabled that and protects it from just being taken from you? That's what makes you happy? Because it's happiness you're getting. You're way past toy money at that point, you can be as vapid as to buy more Bugattis and fly everwhere first class either way. You want to avoid tax for charity? Charity is tax deductable so that's BS on roller skates too. And I /hate/ sounding like an angry socialist because I'm not even close to being the latter.
- Moodles 5y ago
  > And I /hate/ sounding like an angry socialist Well you definitely sound like one when your first sentence is "this is such a garbage attitude". And no, I never said I would do anything, no matter how immoral, to avoid taxes? But you can carry on if you want.
  - harry8 5y ago
    Great so we're on the same page. "not actually illegal" doesn't count for much at all as a deflection of any moral responsibility. Maybe don't say it if you don't believe it? But yeah, it does make me angry and I have a fair bit of sympathy for socialists of which I am definitely not one when they get angry about this kind of thing. Rather more than for tax dodgers claiming "it's not actually illegal so no moral judgement can be made." But that's not you despite what you wrote as you've now clarified. > "Why on earth wouldn't you legally avoid tax if you could" You evidently have answers to this question yourself as indeed we all should. Once there, there is plenty of room for discussion and debate.
mempko 5y ago
> It's your money after all. All money is debt. For you to have money, someone had to get into debt. Either privately via bank loans, or the public via the government spending (most likely bank loans, only 4% is government spending). It's not JUST your money. Your money is also someone's debt. So when Thiel stashes 5 billion away in a Roth IRA instead of spending it, that's 5 billion of debt OTHERS owe. And that's 5 billion in INCOME he is depriving others. (of course he isn't actually holding billions of DOLLARS, but assets valued in dollars, so this isn't exactly the same thing). Think of it like musical chairs. Thiel just took one of the chairs away (put it in the closet) and someone has to lose the game unless more chairs are added to the game. In other words, Thiel's winnings ended up as someone else's losses. The game keeps going as long as someone keeps bringing chairs (the government, or bank loans) but as soon as that stops (2008 or covid), someone will lose, and it isn't Thiel. It will be millions of poor people who will lose their jobs, homes, etc. So the question is, should people hoard debt (and deprive others of income) and gain that much power? That's the question we as a society need to ask ourselves. And so far, judging from the comments here, everyone is ok with that. But as I mentioned before, Thiel doesn't hold cash in the IRA, but assets valued in billions right? So in some sense he is only wealthy if there is a system that can convert those securities into cash. In other words, he is only wealthy as long as the system keeps going. But his efforts ultimately undermine that same system (wealth inequality undermines the system, this is a historic fact).
- Moodles 5y ago
  I don't think this really makes sense. Capitalism isn't a zero sum game for humanity. He created Paypal, which, generally speaking, provided a net value to society. That was his work, and he was one of the 0.0001% to be mega successful with it. Also, the argument "he has savings which is depriving other of income" is neither here nor there when the article is about a Roth IRA vs, presumably, a normal brokerage account with capital gains tax. At the end of the day, we're going to end up arguing about fundamental moral values like how rich should rich people be allowed to be.
  - adolph 5y ago
    If he lives 30 years past IRA checkout time, that's 30 * 365 = 10950 days. $5B / 10950 is $456,621. Spending 456k a day seems like hard work. MacKenzie Scott Gave Away $6 Billion Last Year. It's Not As Easy As It Sounds https://time.com/6050873/mackenzie-scott-profile/ https://time.com/6050873/mackenzie-scott-profile/
jjulius 5y ago
>Also, if you think this should be changed, what should the law be, exactly? I often see people say this in a way that suggests one shouldn't criticize something if they don't have a viable alternative in mind. In point of fact, it's perfectly fine to feel that something might be wrong without knowing what the alternative should be.
calyth2018 5y ago
Just limit the contribution that could be made to Roth IRA? We have a limit of $6000 CAD for TFSA (basically our version of the Roth here) across the board. And not a lot of Canadians make full use of this. I'm not saying what he's doing is illegal, but the article suggests that he jammed in enough eBay shares @$0.30 that when it was $19 per share, worth about $31.5M USD. So somehow he moved about 1.6M shares worth about half a mil? A yearly contribution room regardless of income would at least stop someone from stuffing lots of shares in a short time into Roth. It probably has the unintended consequences of being regressive to those who don't have the cash flow at all to make use of the Roth IRA.
- Moodles 5y ago
  There is a $6000 contribution limit to a Roth IRA already.
tzs 5y ago
> Also, if you think this should be changed, what should the law be, exactly? You're not allowed to make insane profits in a Roth IRA? Why? I'd go with a cap on the amount of returns that are tax free. Put after-tax money into a Roth, and you can take out the original investment plus up to some limit tax-free. Anything over that would be treated just like a regular IRA withdrawal. > In my opinion (and it is an emotional judgement), I think America is based on freedom, and Roth money is money you already paid taxes on, and you should be allowed to invest it however you want. It's your money after all. But you don't pay tax on the earnings of your Roth investments. That's the whole point of the Roth. Your investment choices are: 1. No IRA. You pay tax on your income, and when you invest after-tax money you pay tax on the investment earnings. You can withdraw investment money at any time. 2. Regular IRA. You can defer tax on some of your income and invest that money. You pay tax on the investment earnings and on the original income when you withdraw them from the IRA. You also pay a penalty if you withdraw money before age 59 1/2. 3. Roth IRA. You pay tax on your income, and when you invest after-tax money you do not pay taxes on the investment earnings. You also pay a penalty if you withdraw money before age 59 1/2.

nr2x 5y ago

Pointing fingers at it is how you get public attention to the problem, which may lead to demands for change, which is the purpose of accountability journalism in a democracy.

nomoreplease 5y ago

The easiest solution is to cap at a maximum value for Roth (post-tax) purposes. Pick a number ($50M, $100M, $200M), and anything over gets taxed at traditional rates. You can only put in $6,000USD/year into an IRA, so it's absurd for anyone to pretend a return of $1B USD+ is acceptable. $6k/yr for 30 years at a very-high interest rate of 15% results in $31.3M .. so capping Roth-value at $50M will prevent extreme abuse. Though, I suspect many will argue for a lower cap

Moodles 5y ago
I think the UK has a similar policy with pensions with a cap around £1m. Not saying it's a good or bad idea as I really havn't studied the economics of it, but other countries definitely do it. Though a UK pension is more like a 401(k) (pre tax) than a Roth (after tax).

colinmhayes 5y ago

>It's not actually illegal Buying assets that you know are being sold for below market value with you IRA is illegal. Thiel sold himself paypal stock for .1 cents per share after he had obtained funding that valued the company far above that. I'm not going to say what he did was illegal because that's for courts to decide, but it certainly seems like the IRS has a case.

Retric 5y ago

It is currently illegal to invest your Roth IRA in companies you are an officer/directer etc. As Peter Thiel was CEO of PayPal copying his investment strategy would be illegal. As to why investing in companies you control like this is illegal, it’s far to easy to manipulate the share price of non public companies which could trivially move unlimited gains into a Roth IRA. However, if you can somehow get 1000x returns without breaking the rules then sure there isn’t a direct cap on how large Roth IRA’s can grow.

nrmitchi 5y ago
> It is currently illegal to invest your Roth IRA in companies you are an officer/directer etc. As Peter Thiel was CEO of PayPal copying his investment strategy would be illegal. As far as I know, this hasn't changed; it was not permitted when he did it either. The argument is that all of the activity after this initial prohibited transaction would be impossible to unwind. The typically penalty for things like this is tainting the entire IRA, which just isn't practical at this magnitude.
- mason55 5y ago
  > which just isn't practical at this magnitude. Why not? If I mess up taxes in my IRA, not only do I have to pay them but I have to pay a penalty. But there's some amount over which it's just too big to figure out so we let it go?
  - nrmitchi 5y ago
    Don't get me wrong, I 100% agree with you that based on the facts, it should happen. But short of siezing all of his still-in-the-US assets, Thiel has $2B-worth-of-reasons to spend decades arguing this in court.
    - Retric 5y ago
      And the USG stands to gain 15% of 5 Billion plus penalties from this. That’s well worth the fight.

harry8 5y ago

This is such a garbage attitude. You'd really do anything, no matter how immoral as long as it's not illegal? I hope we never meet and you have zero influence on my life, the lives of my family, and indeed the human race. Taking an ethical position one way or another regardless of the law as currently written, interpreted and enforced is a really reasonable thing to do. Not taking an ethical view and outsourcing that to current law? You need to defend that. Think of all the obvious examples of utterly heinous behavior that were not illegal when they happened. Most of the very worst were not. Start with the bogeymen of evil. As for tax dodging. FFS if you've got more money than your grandchildren can spend and you still want to not pay a contribution to the society that enabled that and protects it from just being taken from you? That's what makes you happy? Because it's happiness you're getting. You're way past toy money at that point, you can be as vapid as to buy more Bugattis and fly everwhere first class either way. You want to avoid tax for charity? Charity is tax deductable so that's BS on roller skates too. And I /hate/ sounding like an angry socialist because I'm not even close to being the latter.

Moodles 5y ago
> And I /hate/ sounding like an angry socialist Well you definitely sound like one when your first sentence is "this is such a garbage attitude". And no, I never said I would do anything, no matter how immoral, to avoid taxes? But you can carry on if you want.
- harry8 5y ago
  Great so we're on the same page. "not actually illegal" doesn't count for much at all as a deflection of any moral responsibility. Maybe don't say it if you don't believe it? But yeah, it does make me angry and I have a fair bit of sympathy for socialists of which I am definitely not one when they get angry about this kind of thing. Rather more than for tax dodgers claiming "it's not actually illegal so no moral judgement can be made." But that's not you despite what you wrote as you've now clarified. > "Why on earth wouldn't you legally avoid tax if you could" You evidently have answers to this question yourself as indeed we all should. Once there, there is plenty of room for discussion and debate.

mempko 5y ago

> It's your money after all. All money is debt. For you to have money, someone had to get into debt. Either privately via bank loans, or the public via the government spending (most likely bank loans, only 4% is government spending). It's not JUST your money. Your money is also someone's debt. So when Thiel stashes 5 billion away in a Roth IRA instead of spending it, that's 5 billion of debt OTHERS owe. And that's 5 billion in INCOME he is depriving others. (of course he isn't actually holding billions of DOLLARS, but assets valued in dollars, so this isn't exactly the same thing). Think of it like musical chairs. Thiel just took one of the chairs away (put it in the closet) and someone has to lose the game unless more chairs are added to the game. In other words, Thiel's winnings ended up as someone else's losses. The game keeps going as long as someone keeps bringing chairs (the government, or bank loans) but as soon as that stops (2008 or covid), someone will lose, and it isn't Thiel. It will be millions of poor people who will lose their jobs, homes, etc. So the question is, should people hoard debt (and deprive others of income) and gain that much power? That's the question we as a society need to ask ourselves. And so far, judging from the comments here, everyone is ok with that. But as I mentioned before, Thiel doesn't hold cash in the IRA, but assets valued in billions right? So in some sense he is only wealthy if there is a system that can convert those securities into cash. In other words, he is only wealthy as long as the system keeps going. But his efforts ultimately undermine that same system (wealth inequality undermines the system, this is a historic fact).

Moodles 5y ago
I don't think this really makes sense. Capitalism isn't a zero sum game for humanity. He created Paypal, which, generally speaking, provided a net value to society. That was his work, and he was one of the 0.0001% to be mega successful with it. Also, the argument "he has savings which is depriving other of income" is neither here nor there when the article is about a Roth IRA vs, presumably, a normal brokerage account with capital gains tax. At the end of the day, we're going to end up arguing about fundamental moral values like how rich should rich people be allowed to be.
- adolph 5y ago
  If he lives 30 years past IRA checkout time, that's 30 * 365 = 10950 days. $5B / 10950 is $456,621. Spending 456k a day seems like hard work. MacKenzie Scott Gave Away $6 Billion Last Year. It's Not As Easy As It Sounds https://time.com/6050873/mackenzie-scott-profile/ https://time.com/6050873/mackenzie-scott-profile/

jjulius 5y ago

>Also, if you think this should be changed, what should the law be, exactly? I often see people say this in a way that suggests one shouldn't criticize something if they don't have a viable alternative in mind. In point of fact, it's perfectly fine to feel that something might be wrong without knowing what the alternative should be.

calyth2018 5y ago

Just limit the contribution that could be made to Roth IRA? We have a limit of $6000 CAD for TFSA (basically our version of the Roth here) across the board. And not a lot of Canadians make full use of this. I'm not saying what he's doing is illegal, but the article suggests that he jammed in enough eBay shares @$0.30 that when it was $19 per share, worth about $31.5M USD. So somehow he moved about 1.6M shares worth about half a mil? A yearly contribution room regardless of income would at least stop someone from stuffing lots of shares in a short time into Roth. It probably has the unintended consequences of being regressive to those who don't have the cash flow at all to make use of the Roth IRA.

Moodles 5y ago
There is a $6000 contribution limit to a Roth IRA already.

tzs 5y ago

> Also, if you think this should be changed, what should the law be, exactly? You're not allowed to make insane profits in a Roth IRA? Why? I'd go with a cap on the amount of returns that are tax free. Put after-tax money into a Roth, and you can take out the original investment plus up to some limit tax-free. Anything over that would be treated just like a regular IRA withdrawal. > In my opinion (and it is an emotional judgement), I think America is based on freedom, and Roth money is money you already paid taxes on, and you should be allowed to invest it however you want. It's your money after all. But you don't pay tax on the earnings of your Roth investments. That's the whole point of the Roth. Your investment choices are: 1. No IRA. You pay tax on your income, and when you invest after-tax money you pay tax on the investment earnings. You can withdraw investment money at any time. 2. Regular IRA. You can defer tax on some of your income and invest that money. You pay tax on the investment earnings and on the original income when you withdraw them from the IRA. You also pay a penalty if you withdraw money before age 59 1/2. 3. Roth IRA. You pay tax on your income, and when you invest after-tax money you do not pay taxes on the investment earnings. You also pay a penalty if you withdraw money before age 59 1/2.