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How Peter Thiel gamed the Roth IRA for tax-free billions
More from Propublica’s Secret IRS Files.
The Propublica Secret IRS Files is a large tranche of IRS leaks detailing the tax-structures of the super-wealthy, documenting the ways in which Leona Helmsley was perfectly correct to assert that “taxes are for the little people.”
https://pluralistic.net/2021/06/15/guillotines-and-taxes/#carried-interest
The latest reporting examines the way that Peter Thiel and other billionaires are able to abuse the Roth IRA (a savings vehicle that is only supposed to be used by middle-class people to save modest sums for retirement) to evade taxes on billions..
The Roth IRA is named for William Roth Jr, a Reaganite anti-tax-extremist GOP Delaware Senator who brokered a new retirement savings tool with the Clinton administration in 1997, a tool that was supposed to allow middle-class savings without giving tax-breaks to the wealthy.
People with middle-class incomes can put away assets worth modest sums — $2000/year initially — in a savings account, pay tax on them at current their current value, and then park them until retirement, cashing them out tax-free.
So you can put $2,000 after-tax dollars’ worth of stocks in your IRA when you’re 30, and then sell the stocks for $10,000 when you’re 59 and a half and avoid the 20% capital gains tax you’d normally owe on the $8,000 profit.
The Roth IRA framework makes the whole thing sound like a middle-class affair. Medium-wage earners can salt away small-dollar bets on stocks, bonds and other assets, and avoid tax on successful bets when they’re ready to retire.
But the wealthy immediately discovered exploitable loopholes in these guard-rails. When Theil — already rich but not yet ultrawealthy — cofounded Paypal, he was able to draw only a nominal wage, while taking the bulk of his compensation in stock.
Drawing a peppercorn wage made the millionaire hedge-fund manager Peter Thiel a “middle-class earner” for the purposes of the Roth IRA…
