drgo on Nostr: So normally you’d want to invest money before taxes and pay tax when you sell the ...

So normally you’d want to invest money before taxes and pay tax when you sell the investment (think Roth 401k). Why? Because there are things like dividends or interest that make value grow exponentially over time.

So, if you had the chance to invest $4 pretax and get a return of 5 doublings (x32) and then pay 50% tax, you’d have $512.

But if you paid 50% tax first, you’d have $16.

Case closed, right?

Well for bitcoin the math isn’t similar. While value of each bitcoin might grow exponentially, it doesn’t matter whether you give up half your coins at the beginning or end.

Example: you have pretax dollars and buy 1 bitcoin. Price goes up x32 and then you retire and pay 50% tax. You have 0.5 bitcoin, or 16x initial investment. But if you paid tax first, you’d only have enough for 0.5 bitcoin and you’d still end up at 16x initial dollar investment.

I think this is somehow far more important than people realize.