How the rich don’t pay taxes

[800renegaderider]

Very interesting read on how the rich use Roth IRAs to avoid paying taxes. There is some Congress folks trying to put a stop to this also.

 

https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank

[Highmark]

Well the article is a bit deceptive.  The wealthy do have methods of legally avoiding taxes but they still pay way more than they earn so someone or somewhere they are paying.

Reality is anyone can do what they are doing.  Not everyone has the chance at buying in on them before they go public but anyone could buy stock in these startups once they go public and do the same thing he has.  The fact remains the wealthy pay a much larger % of the countries taxes than the % of money they earn.  

Yet, from the start, a small number of entrepreneurs, like Thiel, made an end run around the rules: Open a Roth with $2,000 or less. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value. Pay just fractions of a penny per share, a price low enough to buy huge numbers of shares. Watch as all the gains on that stock — no matter how giant — are shielded from taxes forever, as long as the IRA remains untouched until age 59 and a half. Then use the proceeds, still inside the Roth, to make other investments.

 

https://taxfoundation.org/summary-of-the-latest-federal-income-tax-data-2020-update/

 

• In 2017, 143.3 million taxpayers reported earning $10.9 trillion in adjusted gross income and paid $1.6 trillion in individual income taxes.
• The share of reported income earned by the top 1 percent of taxpayers rose to 21 percent, from 19.7 percent in 2016. Their share of federal individual income taxes rose to 38.5 percent, from to 37.3 percent in 2016.
• In 2017, the top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.
• The top 1 percent paid a greater share of individual income taxes (38.5 percent) than the bottom 90 percent combined (29.9 percent).
• The top 1 percent of taxpayers paid a 26.8 percent average individual income tax rate, which is more than six times higher than taxpayers in the bottom 50 percent (4.0 percent).

[Angry ginger]

beauty of an IRA over a 401k is ability to self direct investments.  this is a system anyone can use,  should there be some restrictions,  maybe but it's a tool even the average joe can use.  Anyone who rolls a 401k from one employer to another is an idiot. why have someone else control your options whenyou can roll it to an IRA and have the world open to you.  

 

 

[teamgreen02]

Thread fail.

Quote

In a written statement, Weschler said his retirement account relied on publicly traded investments and strategies available to all taxpayers. Nevertheless, he said he supports reforming the system.

Roth IRAs are great, more people should use them.  The only change I would make is get rid/raise the income cap of who can contribute to a Roth IRA.  

Personally I am limiting our Roth investments since we would have to pay the MN State income tax, which is 7.85%.  I still do some though, 25% Roth if I remember right.  If we were to pull that money out when we live in a different state during retirement there would be no state income tax (SD, TN, FL, TX, WY).

You can even buy physical real estate inside of a Roth IRA to keep gains tax free.

Politicians are eventually going to go after that huge pile of money in Roth IRA's.  What they won't tell you is that money was previously taxed and the government already spent it.

Edited July 19, 2021 by teamgreen02

[DriftBusta]

1 hour ago, Angry ginger said:

beauty of an IRA over a 401k is ability to self direct investments.  this is a system anyone can use,  should there be some restrictions,  maybe but it's a tool even the average joe can use.  Anyone who rolls a 401k from one employer to another is an idiot. why have someone else control your options whenyou can roll it to an IRA and have the world open to you.  

 

 

 

[Highmark]

1 hour ago, teamgreen02 said:

Thread fail.

Roth IRAs are great, more people should use them.  The only change I would make is get rid/raise the income cap of who can contribute to a Roth IRA.  

Personally I am limiting our Roth investments since we would have to pay the MN State income tax, which is 7.85%.  I still do some though, 25% Roth if I remember right.  If we were to pull that money out when we live in a different state during retirement there would be no state income tax (SD, TN, FL, TX, WY).

You can even buy physical real estate inside of a Roth IRA to keep gains tax free.

Politicians are eventually going to go after that huge pile of money in Roth IRA's.  What they won't tell you is that money was previously taxed and the government already spent it.

We keep letting dems win elections and you are correct.   They won't just want a wealth tax on billionaires, they will go after a larger chunk of everyone's retirement accounts in some form or another.