Bill proposed to crack down on backdoor roth (and other loopholes)

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Newsflash - you are not caught in the crossfire, you are part of a group of taxpayers who are targeted. This is a feature, not a bug.

As for "it seems fundamentally unfair and would shake one's belief in any promise made by the Government in the future," don't be ridiculous. Tax laws change all the time, sometimes they benefit you, sometimes they don't. But that fact that they change is not, in and of itself, unfair. Does it sting? Sure. Unfair? Of course not. At least this one is targeted at people who can afford it.

Many people planned and made decisions based on the protections that these accounts offered. If we capped IRAs at $500k and taxed all distributions above that amount, I bet we'd see protests in the streets of DC. By your definition, that would not be unfair. It seems pretty unfair to me. I see no reason why the cap couldn't be lowered to capture anyone at almost any level; when you look at the median income and net worth in this country, almost anyone who chose to save for 20-30 years rather than spend looks like a fat cat.

I understand PP's frustration with the AAPL stock because early withdrawals from IRAs are taxed at short-term capital gains rates, so the people who tried to prudently plan, aren't just losing the IRA but are paying an extra double-digit % penalty by paying short-term capital gains tax on what would normally be capital gains.

It's also pretty obviously targeted just at Peter Thiel. Nobody cared when Mitt Romney's $100m IRA was disclosed. Something about Peter Thiel really pissed off the dems. He has a few billion dollars to fight back with so it will be interesting to watch.

This... isn't right. Unless you're saying that's what the proposal would be if the rules change?

Roth withdrawals for those under 59 are taxed at short term / ordinary income tax rates.

If the PP had held AAPL outside their Roth in a normal account, it would be taxed at long term capital gains rates, which are lower.

Under the proposed law, not only are the Roth advantages rolled back but people are actually worse off than if they’d never done it in the first place. I’m not sure if that’s intentionally or just a byproduct of what seems to be a hastily drafted bill.

I mean, this is just a bill, there are details that will be changed, if it even goes forward. I won't be surprised if they let it be long term capital gains rate. But I still am just not feeling bad for people this impacts.

Why feel bad if you lower CMS reimbursements to physicians, they're all rich and have job stability...

Why feel bad if you raise income taxes on people who make $250k/year or more, who cares if they live in a HCOL area and are loaded up with student debt from a decade spent in school, they're still better off than most workers...

Why feel bad if you raise property taxes, people who own a home are better off than the homeless...

It's a slippery slope and I'd rather taxes were fair, consistent, and policy driven, vs emotional witch hunts which in this case is politically focused on one solitary citizen.

No, it is targeting MANY high income, high wealth individuals who use a neat tax loophole to get tax breaks for 'retirement' on their long term investments. BTW, i make >$250k, and use megabackdoor Roth. Might even hit $10M in qualified accounts at some point, if I don't retire early. I'm personally sad (for my net worth) that the backdoor roth party may be over, but it is a crazy loophole that shouldn't be there. It is the definition of tax break for the rich. And also, yes, a HUGE tax break for a particular mega rich guy. But, it is very policy driven.

I'm all for capping it they should just allow excess balances to be withdrawn tax free so it doesn't turn into years long litigation.

And there are numerous other tax breaks for the rich that are much worse like QSBS, 1031 exchanges, and inherited step up basis that have all been left in place.

You're right, here's an inconsistency here. We should get rid of those loopholes too.

[Anonymous]

The bill also includes raising the cap gains tax to 25%.

[Anonymous]

Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Newsflash - you are not caught in the crossfire, you are part of a group of taxpayers who are targeted. This is a feature, not a bug.

As for "it seems fundamentally unfair and would shake one's belief in any promise made by the Government in the future," don't be ridiculous. Tax laws change all the time, sometimes they benefit you, sometimes they don't. But that fact that they change is not, in and of itself, unfair. Does it sting? Sure. Unfair? Of course not. At least this one is targeted at people who can afford it.

Many people planned and made decisions based on the protections that these accounts offered. If we capped IRAs at $500k and taxed all distributions above that amount, I bet we'd see protests in the streets of DC. By your definition, that would not be unfair. It seems pretty unfair to me. I see no reason why the cap couldn't be lowered to capture anyone at almost any level; when you look at the median income and net worth in this country, almost anyone who chose to save for 20-30 years rather than spend looks like a fat cat.

I understand PP's frustration with the AAPL stock because early withdrawals from IRAs are taxed at short-term capital gains rates, so the people who tried to prudently plan, aren't just losing the IRA but are paying an extra double-digit % penalty by paying short-term capital gains tax on what would normally be capital gains.

It's also pretty obviously targeted just at Peter Thiel. Nobody cared when Mitt Romney's $100m IRA was disclosed. Something about Peter Thiel really pissed off the dems. He has a few billion dollars to fight back with so it will be interesting to watch.

This... isn't right. Unless you're saying that's what the proposal would be if the rules change?

Roth withdrawals for those under 59 are taxed at short term / ordinary income tax rates.

If the PP had held AAPL outside their Roth in a normal account, it would be taxed at long term capital gains rates, which are lower.

Under the proposed law, not only are the Roth advantages rolled back but people are actually worse off than if they’d never done it in the first place. I’m not sure if that’s intentionally or just a byproduct of what seems to be a hastily drafted bill.

I mean, this is just a bill, there are details that will be changed, if it even goes forward. I won't be surprised if they let it be long term capital gains rate. But I still am just not feeling bad for people this impacts.

Why feel bad if you lower CMS reimbursements to physicians, they're all rich and have job stability...

Why feel bad if you raise income taxes on people who make $250k/year or more, who cares if they live in a HCOL area and are loaded up with student debt from a decade spent in school, they're still better off than most workers...

Why feel bad if you raise property taxes, people who own a home are better off than the homeless...

It's a slippery slope and I'd rather taxes were fair, consistent, and policy driven, vs emotional witch hunts which in this case is politically focused on one solitary citizen.

No, it is targeting MANY high income, high wealth individuals who use a neat tax loophole to get tax breaks for 'retirement' on their long term investments. BTW, i make >$250k, and use megabackdoor Roth. Might even hit $10M in qualified accounts at some point, if I don't retire early. I'm personally sad (for my net worth) that the backdoor roth party may be over, but it is a crazy loophole that shouldn't be there. It is the definition of tax break for the rich. And also, yes, a HUGE tax break for a particular mega rich guy. But, it is very policy driven.

I'm all for capping it they should just allow excess balances to be withdrawn tax free so it doesn't turn into years long litigation.

And there are numerous other tax breaks for the rich that are much worse like QSBS, 1031 exchanges, and inherited step up basis that have all been left in place.

You're right, here's an inconsistency here. We should get rid of those loopholes too.

Seems like QSBS are being looked at. I don't know anything about them, so I can't comment... https://www.bloomberg.com/news/articles/2021-09-21/silicon-valley-fears-the-end-of-qsbs-every-tech-millionaires-favorite-tax-break

1031 seems to have a good real estate lobby so appears safe for now... but I hope they look at that. inherited step up basis should also be looked at.

[Anonymous]

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

nowhere left to accrue untaxed wealth.

Fixed that for you. They are not eliminating tax advantage accounts, but they are trying to make them in line with what would be needed for an average to upper middle class retirement.

[Anonymous]

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

Wait, what? Taxing stock gains that you haven't even cashed in? That's ridiculous. It's not even income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

Wait, what? Taxing stock gains that you haven't even cashed in? That's ridiculous. It's not even income.

Yes, it's ridiculous. Shows you how slippery the slope is.

[Anonymous]

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487

[Anonymous]

Anonymous wrote:

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487

Taxing productive people is stupid and makes us all worse off. Raise the estate tax and close the loopholes and cut income taxes. Going after people like Peter Thiel while they are alive is self-indulgent but counter productive. Let them produce and spend whatever they want while they're alive, and take most of it back upon their death to keep it from unproductive heirs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487

Taxing productive people is stupid and makes us all worse off. Raise the estate tax and close the loopholes and cut income taxes. Going after people like Peter Thiel while they are alive is self-indulgent but counter productive. Let them produce and spend whatever they want while they're alive, and take most of it back upon their death to keep it from unproductive heirs.

I kind of agree with this - but I also don't think that Theil (or anyone) should have a massive massive IRA and b e able to dodge massive amounts of taxes by using it, which get a special tax treatment designed to support an average person in retirement. It is a loophole, so close it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487

I don't support billionaires, but this is dumb. Tax them for their realized gains all you want. But until you realize the gains, it's not income. If the unrealized gains suddenly evaporate in a market crash, do you get a refund on the tax?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487

Taxing productive people is stupid and makes us all worse off. Raise the estate tax and close the loopholes and cut income taxes. Going after people like Peter Thiel while they are alive is self-indulgent but counter productive. Let them produce and spend whatever they want while they're alive, and take most of it back upon their death to keep it from unproductive heirs.

I kind of agree with this - but I also don't think that Theil (or anyone) should have a massive massive IRA and b e able to dodge massive amounts of taxes by using it, which get a special tax treatment designed to support an average person in retirement. It is a loophole, so close it.

Theil exploited a Roth IRA conversion loophole. Taxing unrealized gains does nothing to address what he did.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487

Taxing productive people is stupid and makes us all worse off. Raise the estate tax and close the loopholes and cut income taxes. Going after people like Peter Thiel while they are alive is self-indulgent but counter productive. Let them produce and spend whatever they want while they're alive, and take most of it back upon their death to keep it from unproductive heirs.

Hell no. Tax the income and property of billionaires. Raise those taxes.

Taxing unrealized gains is dumb and should not happen, but don't use that as an excuse to slip in trickle-down economic theory for all taxes.

[Anonymous]

so no they are going to tax you when you haven't made profit,are they going to consult a horoscope to predict the future wtf.

[Anonymous]

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.[/quote]

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487[/quote]

Taxing productive people is stupid and makes us all worse off. Raise the estate tax and close the loopholes and cut income taxes. Going after people like Peter Thiel while they are alive is self-indulgent but counter productive. Let them produce and spend whatever they want while they're alive, and take most of it back upon their death to keep it from unproductive heirs.[/quote]

I kind of agree with this - but I also don't think that Theil (or anyone) should have a massive massive IRA and b e able to dodge massive amounts of taxes by using it, which get a special tax treatment designed to support an average person in retirement. It is a loophole, so close it.[/quote]

Theil exploited a Roth IRA conversion loophole. [b]Taxing unrealized gains does nothing to address what he did.[/b] [/quote]

No, but this thread isn't (wasn't) about taxing unrealized gains (which I don't support). Was responding to whines about "taxing productive people" and
"going after Peter Theil", which is all about IRA loopholes.

(And actually, I don't know if he exploited the backdoor loophole, I think he just put founders stock which was "valued at" < $2k Roth limit in his Roth IRA, and it exploded.0