Here’s how I see this:
Under current law, the rich can put their truly speculative investments, or shares and options on their own companies (as to which they have more control over subsequent appreciation than you and I have over the shares in our IRAs) into a Roth IRA.
Mitt Romney did this with parts of the companies Bain Capital acquired -— the “spinoff” -— and his IRA is now over $100 million. Peter Theil did it with Paypal shares and his IRA is now over $5 billion.
You and I (assuming you aren’t as rich as Mitt Romney or Peter Thiel) aren’t ever getting into that club.
Libertarians should not support one set of rules for the uber wealthy and another set for the rest of us. The “private placement” exception is a rule that allows self-dealing, something which I can never do in my IRA. For example, I cannot have my self-directed IRA purchase any property from me or any of my relatives, regardless of the price. It is a prohibited transaction that comes with serious penalties if you try it.
But Mitt could have his Roth IRA buy his spinoffs, and Theil could have his Roth IRA buy shares in the company he founded.
So the Dems get to virtue signal but watch as the final bill, if any actually passes, eliminates most of the described changes or adds new exception that allow the uber wealthy to continue doing what they have always been doing.
Looking like us peons with only a couple of Mill need not worry.
Ha Ha
what about contribution limits?
Are you saying that moving a regular IRA to a Roth IRA is now verboten?
Thanks for the clarifications.
I think that there’s another equally valid (small-l) libertarian perspective.
The “rule” that requires an investor to be “accredited” in order to invest in private placements was ostensibly created to protect the unsophisticated rubes from exploitation. But why accept that? The other way to ‘fix’ this would be to remove the requirement for accreditation, rather than ban the use of private placements.
Anyway, the bar is pretty darn low. Anyone with a net worth of $1MM (excluding his private residence — why?) meets the bar. So does anyone making 200K a year for 3 years running (that’s gross, net of taxes. Again, why?)
Of course, the real problem is that marginal tax rates are simply so high that people are working around the edges, trying to shield at least some of their hard-earned income from the tax man.