Peter Thiel stashed $5B tax-free in an IRA, and now lawmakers want to crack down — but one expert says it's time to kill the tax breaks for everyone

Congress created the Roth IRA to help regular workers save for retirement. On July 22, Sen. Ron Wyden (D-Ore)., and Rep. Richard Neal (D-Mass) introduced a bill to stop accounts like Thiel’s from ever getting that big.

But one economist wants to go even further — he wants the tax break, and your retirement accounts, killed entirely.

What the Wyden-Neal bill would do

The bill itself targets a narrow group: people earning more than $400,000 a year ($450,000 for couples) who hold more than $10 million across their IRAs, Roth accounts and 401(k)s. They wouldn’t be able to add another dollar to their account. Each year they’d withdraw half of everything above $10 million and pay income tax on it. Any amount above $20 million would have to be fully withdrawn.

New Joint Committee on Taxation data released with the bill shows more than 32,000 individuals each held over $10 million in tax-sheltered retirement accounts at the end of 2024, averaging $17 million. At the very top, 208 people held $85.1 billion between them — $409 million each.

How does anyone get $10 million into an account like that? Contributions can’t do it — the annual IRA limit was $2,000 when Thiel opened his, and it’s $7,500 for 2026 ($8,600 for those 50 and over). The move is to put in something worth almost nothing, then wait for it to climb.

That depends on a low valuation, which is exactly where the IRS runs into trouble. A 2014 Government Accountability Office report found the agency already going after undervalued assets inside IRAs, through audits that drag and are hard to win in court, because nobody can price a private company with certainty.

“Individuals worth hundreds of millions or billions of dollars do not need any taxpayer subsidy to save,” said Wyden, ranking Democrat on the Senate Finance Committee, in a media release.

This idea keeps coming back. Obama proposed a cap in 2013, a version died with the Build Back Better Act in 2021 and Biden revived it in his fiscal 2024 budget. None of it became law. This version likely won’t either, not with Republicans holding both chambers. But if Democrats flip the House or Senate in November, Neal, House Ways and Means Committee ranking member, and Wyden would chair the two committees that write tax law.

Why one economist wants the tax break gone for everyone

Andrew Biggs once rose to principal deputy commissioner at the Social Security Administration — the agency’s No. 2 job. He’s now a senior fellow at the American Enterprise Institute. In 2024, he and Boston College economist Alicia Munnell published a brief arguing the government should stop subsidizing retirement accounts and send the money to Social Security. The Treasury put the cost of the break at about $185 billion in 2020 alone.

“If I were in charge, I wouldn’t have the tax preference at all,” Biggs told USA TODAY.

But not everyone buys it. Economists at Biggs’ own institute have argued that workers who build private savings should lean less on government programs later in life.

Unfortunately, the retirement account tax break does little to raise how much the average person saves. High earners just move money they were already setting aside into accounts where it grows untaxed. What works is signing people up by default. Britain started doing that in 2012, and by 2024 nine in 10 eligible workers were paying into a workplace pension, according to the Department for Work and Pensions.

Biggs has also been a proponent of automatic enrollment in workplace retirement plans, noting in a National Association of Plan Advisors report, “If a big concern people have is that not enough Americans either offer a retirement plan or participate, something like the U.K. structure is how you do it.”

Who the current tax break actually helps

Around half of American households — 54.3% — had any retirement account at all in 2022, according to a Congressional Research Service analysis of Federal Reserve data. Among those nearing retirement with a 401(k), median combined 401(k) and IRA balances reached $204,000, according to the Center for Retirement Research at Boston College. Those gains went mostly to higher earners.