The confusion here is that trad IRAs can be pretax or posttax dollars.

This rule only matters if you have pretax dollars in an IRA that you want to also use posttax dollars to backdoor.

To be clear, it wouldn't be taxed at 90% in this example. It's that 90% of the conversion amount would be taxed as ordinary income.

AFAICT there's no extra paying taxes here or anything. Your pretaxed dollars are being taxed, instead of posttax dollars not being taxed.

No. Pro rata is Latin for “in proportion.” It’s one dollar for one dollar. If you add $7k to your tIRA to do the backdoor Roth, you also must convert $7k of existing funds which becomes taxable income. So you pay your marginal tax rate, on half the amount.

IMO not that big of a deal to contribute $7k, convert $7k, and pay $2-3k in taxes to get $14k in the Roth space that will grow tax free forever. Most people are too pre-tax heavy in their retirement strategies anyway.

>The pro rata rule would make your backdoor contribution 90+% taxed so it would be pointless

All contributions or conversions to Roth IRAs are after-tax dollars.