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why is the money withdrawn from traditional IRA taxed at the ordinary income tax rate?
The simplest explanation is that a traditional IRA is a method of deferring taxes. That is, normally you pay taxes on money you earn at the ordinary rate then invest the rest and only pay the capital gains rate.  However, with a traditional IRA you don't pay taxes on the money when you earn it, you defer the payment of those taxes until you retire. So in the end it ends up being treated the same. That said, if you are strategic about it you can wind up paying less taxes with this type of account.