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The income has already been taxed. The economics are identical to other qualified retirement plans. This is simply more about restricting freedoms and making ex

The income has already been taxed. The economics are identical to other qualified retirement plans. This is simply more about restricting freedoms and making excuses for targeting Peter Thiel personally.

ejstronge 5y ago
> The income has already been taxed This is not true - traditional IRA contributions are made pre-tax.
- wonderwonder 5y ago
  Not in the US. IRA contributions are post tax. 401k contributions are pre-tax. Depending on where you live this may be semantics as they may be the same program with different names.
  - colinmhayes 5y ago
    This is wrong. Both 401k and Ira have roth variants which are post tax. The normal variants are pre-tax.
    - nybble41 5y ago
      Non-Roth 401ks can have before-tax and after-tax contributions, though I'm not certain I see the point of making after-tax contributions since the gains will be taxed at ordinary income rates (not as capital gains) when distributed and you won't be able to make withdrawals without penalty until you reach "retirement age". You might as well just open a brokerage account and invest on your own. The one selling point for after-tax 401k contributions was that you could roll them over into a Roth IRA later, but that won't be an option any more if this proposal passes. Which is too bad for anyone who was counting on a Roth IRA conversion as part of their retirement strategy.
- the_optimist 5y ago
  You’re wrong and confusing people here. Roth’s are post-tax at investment, not taxed later. Traditional and 401k are pre-tax at investment, taxed on distribution. Economically equivalent.
  - UncleMeat 5y ago
    There are Roth 401ks.
  - ejstronge 5y ago
    > You’re wrong and confusing people here I'm sorry, but I made a factual statement. The money placed into a traditional IRA is a pre-tax contribution. The treatment of distributions is not relevant here; I am responding to a GP claim that money used in self-directed IRAs is strictly money that has been taxed.
colinmhayes 5y ago
Restricting the freedom to dodge taxes...
- the_optimist 5y ago
  Same exact $ amount as in a 401(k). This is only about power and control.
  - colinmhayes 5y ago
    The problem is that he sold himself hundreds of thousands of dollars of stock for $5000. Yes, he wouldn't be able to do that with a 401k, but the point isn't about power and control, it's the fraud he commited.
- benmw333 5y ago
  ... taxation is theft.
  - czbond 5y ago
    To be fair, taxation is useful for everyone and the common good. What can be considered.... wrong is EXTRA taxation. Meaning the governments job should be to operate as leanly as possible by being most efficient. To me that means, highly systems efficiently, low personnel overhead, large reduction in programs supported. Instead - the name is big and bloated. Expanding budget deficits mean expanded spending, which can never go down.
    - technick 5y ago
      Couldn't agree more, I would be happy to pay taxes if the government represented me. However under the republic we have, it has fallen extremely short in representing my interest. I vote in every election, write letters to my representatives and attend town halls.
  - moate 5y ago
    No, it's payment for goods and services. If you want to live in a stateless utopia, you don't get any of the benefits of the state. That's the social contract.
midasuni 5y ago
I’ve never understood why we tax income rather than wealth. Taxes pay for a stable society (army, police force, etc), which has more value for the wealthy. Taxing tends to remove incentive to do something by increasing the cost. We want people to be productive (get paid an income) Taxing wealth rather than capital gains and income seems far better, once you set aside the enforcement part of the conversation. Once you bring that part in, you’re basically arguing we should o what’s easy, not what’s right.
- wpietri 5y ago
  This simple answer is it's easier. Income is mostly cash-denominated, so it's very easy to value. Wealth is often illiquid, so it's hard to know how much to tax. Look at property tax, for example. It's a wealth tax and it requires a very complicated apparatus to generate ok-ish numbers every year. But that mostly works because houses are a moderately liquid market, so appraisers can mark to the existing market. And even then there's a lot of dubious stuff around the margins, like the way Trump was giving different valuation numbers depending on whether he wanted a loan or to brag (high valuation number) versus paying taxes (low valuation number).
PaulDavisThe1st 5y ago
The income has not been taxed. Thiel purchased securities inside the Roth IRA, and they gained value. Being inside a Roth protects those gains from being taxed. Roth IRAs were not intended to allow unlimited (or even "huge") gains to remain untaxed, which is why they had a low contribution limit. What Thiel did was (and is) not illegal, but it is viewed as an abuse of the intent of a Roth IRA that (some in) Congress want to restrict in the future.
- the_optimist 5y ago
  This is just flat wrong. The income contributed to a Roth IRA is post-tax. It is a retirement account that is economically equivalent to a 401k. The only differences are 1) timing on when the gains are taxed and 2) whether you can self-direct it or not. Saying “not intended to allow” is simply nonsense that covers for the abusive 401k system that fleeces individuals at the benefit of the finance industry.
  - PaulDavisThe1st 5y ago
    The "income" in this case is the gains on the stock purchased as part of the Roth IRA, not the income contributed. Nobody cares about Thiel spending a few post-tax dollars on some wierdly cheap stock. The issue is that this stock grew to be worth US$5B within the Roth.
    - the_optimist 5y ago
      That’s also incorrect. If he could have done this in a 401k he would have Exactly the Same amount of money.
      - PaulDavisThe1st 5y ago
        He would owe taxes on the amount when he withdrew it from the 401k or traditional IRA. He will not owe taxes on it the gain occured while the stocks are in a Roth IRA.
belltaco 5y ago
>The income has already been taxed Uhh... have you heard of capital gains tax? (And capital loss deductions).
- the_optimist 5y ago
  The income contributed to a Roth is post-tax. This is economically equivalent to a 401k. Equivalent.
  - belltaco 5y ago
    So? There are limits to Roth contributions(and 401Ks) which have been abused by finding loopholes, which the proposed law closes. The fact that it's post-tax has nothing to do with it. Something being post tax doesn't magically make it an untouchable investment. For example capital gains tax is applied to post-tax investments.

ejstronge 5y ago

> The income has already been taxed This is not true - traditional IRA contributions are made pre-tax.

wonderwonder 5y ago
Not in the US. IRA contributions are post tax. 401k contributions are pre-tax. Depending on where you live this may be semantics as they may be the same program with different names.
- colinmhayes 5y ago
  This is wrong. Both 401k and Ira have roth variants which are post tax. The normal variants are pre-tax.
  - nybble41 5y ago
    Non-Roth 401ks can have before-tax and after-tax contributions, though I'm not certain I see the point of making after-tax contributions since the gains will be taxed at ordinary income rates (not as capital gains) when distributed and you won't be able to make withdrawals without penalty until you reach "retirement age". You might as well just open a brokerage account and invest on your own. The one selling point for after-tax 401k contributions was that you could roll them over into a Roth IRA later, but that won't be an option any more if this proposal passes. Which is too bad for anyone who was counting on a Roth IRA conversion as part of their retirement strategy.
the_optimist 5y ago
You’re wrong and confusing people here. Roth’s are post-tax at investment, not taxed later. Traditional and 401k are pre-tax at investment, taxed on distribution. Economically equivalent.
- UncleMeat 5y ago
  There are Roth 401ks.
- ejstronge 5y ago
  > You’re wrong and confusing people here I'm sorry, but I made a factual statement. The money placed into a traditional IRA is a pre-tax contribution. The treatment of distributions is not relevant here; I am responding to a GP claim that money used in self-directed IRAs is strictly money that has been taxed.

colinmhayes 5y ago

Restricting the freedom to dodge taxes...

the_optimist 5y ago
Same exact $ amount as in a 401(k). This is only about power and control.
- colinmhayes 5y ago
  The problem is that he sold himself hundreds of thousands of dollars of stock for $5000. Yes, he wouldn't be able to do that with a 401k, but the point isn't about power and control, it's the fraud he commited.
benmw333 5y ago
... taxation is theft.
- czbond 5y ago
  To be fair, taxation is useful for everyone and the common good. What can be considered.... wrong is EXTRA taxation. Meaning the governments job should be to operate as leanly as possible by being most efficient. To me that means, highly systems efficiently, low personnel overhead, large reduction in programs supported. Instead - the name is big and bloated. Expanding budget deficits mean expanded spending, which can never go down.
  - technick 5y ago
    Couldn't agree more, I would be happy to pay taxes if the government represented me. However under the republic we have, it has fallen extremely short in representing my interest. I vote in every election, write letters to my representatives and attend town halls.
- moate 5y ago
  No, it's payment for goods and services. If you want to live in a stateless utopia, you don't get any of the benefits of the state. That's the social contract.

midasuni 5y ago

I’ve never understood why we tax income rather than wealth. Taxes pay for a stable society (army, police force, etc), which has more value for the wealthy. Taxing tends to remove incentive to do something by increasing the cost. We want people to be productive (get paid an income) Taxing wealth rather than capital gains and income seems far better, once you set aside the enforcement part of the conversation. Once you bring that part in, you’re basically arguing we should o what’s easy, not what’s right.

wpietri 5y ago
This simple answer is it's easier. Income is mostly cash-denominated, so it's very easy to value. Wealth is often illiquid, so it's hard to know how much to tax. Look at property tax, for example. It's a wealth tax and it requires a very complicated apparatus to generate ok-ish numbers every year. But that mostly works because houses are a moderately liquid market, so appraisers can mark to the existing market. And even then there's a lot of dubious stuff around the margins, like the way Trump was giving different valuation numbers depending on whether he wanted a loan or to brag (high valuation number) versus paying taxes (low valuation number).

PaulDavisThe1st 5y ago

The income has not been taxed. Thiel purchased securities inside the Roth IRA, and they gained value. Being inside a Roth protects those gains from being taxed. Roth IRAs were not intended to allow unlimited (or even "huge") gains to remain untaxed, which is why they had a low contribution limit. What Thiel did was (and is) not illegal, but it is viewed as an abuse of the intent of a Roth IRA that (some in) Congress want to restrict in the future.

the_optimist 5y ago
This is just flat wrong. The income contributed to a Roth IRA is post-tax. It is a retirement account that is economically equivalent to a 401k. The only differences are 1) timing on when the gains are taxed and 2) whether you can self-direct it or not. Saying “not intended to allow” is simply nonsense that covers for the abusive 401k system that fleeces individuals at the benefit of the finance industry.
- PaulDavisThe1st 5y ago
  The "income" in this case is the gains on the stock purchased as part of the Roth IRA, not the income contributed. Nobody cares about Thiel spending a few post-tax dollars on some wierdly cheap stock. The issue is that this stock grew to be worth US$5B within the Roth.
  - the_optimist 5y ago
    That’s also incorrect. If he could have done this in a 401k he would have Exactly the Same amount of money.
    - PaulDavisThe1st 5y ago
      He would owe taxes on the amount when he withdrew it from the 401k or traditional IRA. He will not owe taxes on it the gain occured while the stocks are in a Roth IRA.

belltaco 5y ago

>The income has already been taxed Uhh... have you heard of capital gains tax? (And capital loss deductions).

the_optimist 5y ago
The income contributed to a Roth is post-tax. This is economically equivalent to a 401k. Equivalent.
- belltaco 5y ago
  So? There are limits to Roth contributions(and 401Ks) which have been abused by finding loopholes, which the proposed law closes. The fact that it's post-tax has nothing to do with it. Something being post tax doesn't magically make it an untouchable investment. For example capital gains tax is applied to post-tax investments.