My spouse and I earn too much to contribute to a Roth I.R.A. Recently, we learned that it is legal to contribute to a traditional I.R.A. and then convert it into a Roth. My understanding of the Roth is that people who make over a certain income shouldn’t benefit from its advantages. My spouse says that because it is legal to roll a traditional I.R.A. into a Roth, there is nothing unethical about doing so. Is this a case in which the law and the ethical standard conflict? - S.R., TENNESSEE
Saying there’s an ethical “standard” behind the Roth limit would suggest that there’s some kind of nonnegotiable, inherent justification for what the specific financial cutoff should be. That’s not the case. The so-called standard for who is eligible merely reflects whatever the rule states; if the legislation were marginally changed (and people in your income bracket were suddenly deemed within the range of Roth eligibility), you would not worry that the previous standard was altered. We all have an abstract obligation to contribute to whatever society we engage with, but the legal particulars of that contribution — the details outlining what any individual person owes and which exemptions that person is qualified to use — are arbitrary (and created through imperfect legislative consensus). The tax code is constantly changing, and rarely for moral reasons. So if the tax code states that this (seemingly sketchy) I.R.A. conversion is legal, you can use it. The rule itself may be flawed, but, in this specialized case, your only obligation is to stay within the boundaries of the code.
In a country like Norway, the tax rate is much higher than it is here. If you moved to Oslo, that’s the rate you would be obligated to pay — whatever the Norwegian tax code states. If you want to debate which country’s tax code is more ethically sound, that’s a different discussion. That’s a theoretical debate. But as a citizen of any given country, you are responsible only to adhere to the tax system that exists (regardless of its logic).