By: Ike Brannon
A couple of decades ago Peter Thiel opened a Roth IRA and put $1,700 in into his account, which he used to purchase stock in a startup called PayPal PYPL -1.9%. The investment ended up doing extremely well, to put it mildly: The company did an IPO three years later, and today Thiel’s initial investment is worth about five billion dollars.
Politicians like Elizabeth Warren and Bernie Sanders are outraged that Thiel’s money won’t be taxed, and they are pursuing legislation that would limit the size of IRAs, the types of investments that can be a part of an IRA, or place an income threshold for participation in one.
The debate created by Thiel’s IRA raises an important question: Are enormous retirement accounts a problem, and should we legislate to prevent future supersized IRAs?
In a word, no.
For starters, most laws that are a response to an anecdote tend to be bad policy with unanticipated side effects, and any effort to prevent another billion-dollar Roth IRA will undoubtedly create a variety of other unanticipated problems that will make our inability to tax some of Peter Thiel’s money seem like small potatoes.
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