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'Mega-IRAs' Long Overdue for a Crackdown: Senate Finance Chair

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What You Need to Know

  • IRAs were designed to provide retirement security to middle-class families, not allow the super wealthy to avoid taxes, Sen. Wyden said.
  • The number of IRAs with $5 million to $10 million tripled from 2011 to 2019.
  • Spurred by reports of Peter Thiel's $5 billion Roth IRA, lawmakers have been considering limits on large account balances.

New data released by the Joint Committee on Taxation shows “it’s long past time to crack down on mega-IRAs,” Senate Finance Committee Chair Ron Wyden, D-Ore., said Wednesday.

The new JCT data, requested by Wyden and House Ways & Means Committee Chairman Richard Neal, D-Mass., provides an update to a 2014 Government Accountability Office report requested by Wyden.

The GAO report, which used 2011 tax data, showed nearly 8,000 taxpayers had aggregate IRA balances of $5 million to $10 million. A total of more than 9,000 taxpayers had $5 million or more.

“The new JCT data show a threefold increase in aggregate IRA balances of $5 million or more,” the lawmakers said.

As of the 2019 tax year, nearly 25,000 taxpayers had aggregate IRA balances of $5 million to $10 million. In total, more than 28,600 taxpayers had more than $5 million, including 497 taxpayers with aggregate IRA balances of $25 million or more, the JCT found. The average aggregate account balance for these 497 taxpayers was more than $150 million.

“It is shocking, but not surprising, to see how the use of mega-IRA accounts by mega-millionaires and billionaires has exploded,” Wyden said Wednesday during a hearing. “IRAs were designed to provide retirement security to middle-class families, not allow the super wealthy to avoid paying taxes. This is the perfect example of what I’ve long called the tale of two tax codes.”

The hearing was titled “Building on Bipartisan Retirement Legislation: How Can Congress Help?”

Neal added that the data shows “that the exploitation of IRAs is a growing problem. IRAs are intended to help Americans achieve long-term financial security, not to enable those who already have extraordinary wealth to avoid paying their fair share in taxes and deepen existing inequalities in our nation. The Ways and Means Committee is already looking at strategies to ensure that this retirement savings tool isn’t misused as a tax shelter for folks at the very top.”

On July 8, Neal said that his committee is mulling legislation that would limit “the total amount of money that can be saved in tax-preferred retirement accounts, and putting an end to the tax dodging some do when saving in IRAs.

“Incentives in our tax code that help Americans save for retirement were never intended to enable a tax shelter for the ultra-wealthy,” Neal said, referring to recent reports about Peter Thiel’s $5 billion Roth IRA. “The Ways and Means Committee is working on legislation that will stop IRAs from being exploited.”

Financial services firms and policy groups also urged President Joe Biden Wednesday to issue an executive order to create an inter-agency task force on retirement security as part of his Build Back Better initiative.

Pictured: Senate Finance Committee Chairman Ron Wyden. (Photo: Bloomberg)