This is an excerpt from an op-ed by ITEP Senior Fellow Steve Wamhoff that appeared in Fortune.
A last-minute change to the just-passed tax plan that would benefit real estate investors like Donald Trump should surprise no one. He loudly opposed 1986 tax reform legislation because it shut down tax shelters for real estate investors like him. So, it’s only natural that the Trump-GOP tax plan creates new loopholes for real estate investors and makes the tax code more complicated.
The 1986 law solved a lot of problems. In the first half of the 1980s, Americans had lost faith in their tax system much as they have today. The tax rules encouraged investors to do all sorts of things with their money that did nothing to build the economy, but rather only made sense as tax shelters. The rules related to depreciation and losses were so generous that anyone with money and a decent accountant could very quickly write off the costs of their investments, including ones in which they were just passive investors, and use any losses to offset their other income. Real estate developers built office buildings that no one needed. Business ventures were created to produce losses that only existed on paper and sheltered real income from taxes. Read more