In a tweet on Wednesday, after the New York Times reported that President Donald Trump lost over $1 billion between 1985 and 1994 and avoided paying income taxes for eight of those years, Trump wrote that in the 1980s and 1990s, almost all real estate developers took massive tax write-offs and deductions, calling it “sport.”
….you would get it by building, or even buying. You always wanted to show losses for tax purposes….almost all real estate developers did – and often re-negotiate with banks, it was sport. Additionally, the very old information put out is a highly inaccurate Fake News hit job!
— Donald J. Trump (@realDonaldTrump) May 8, 2019
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While Trump now seems to ridicule those tax loopholes, almost 30 years ago he lobbied Congress to renew and expand them. Now as president, tax experts say Trump widened loopholes that benefit real estate developers like himself.
Testifying before the House Budget Committee on Nov. 21, 1991, Trump called the Tax Reform Act of 1986, signed into law by President Ronald Reagan, “an absolute catastrophe for our country.”
“It has taken all incentive away from investing in real estate, and real estate really means so many jobs,” Trump told the committee.
The sweeping, bipartisan law that Trump railed against was popular in both Democrat and Republican circles, as it got rid of numerous loopholes, reduced tax-code chicanery and lowered tax rates across income brackets.
“The 1986 tax law was the gold standard for tax reform because it removed loopholes and simplified the tax system,” said Steve Wamhoff, director of federal tax policy with the Institute on Taxation and Economic Policy.
“The real estate industry lobbied Congress to bring back loopholes that applied just to them, and they succeeded,” Wamhoff said. “Donald Trump was part of that.”
While Trump did not get everything he wanted, in 1993 Congress changed the tax law to allow real estate professionals to take unlimited deductions on losses from rental activities.
The word no one is mentioning is “depression,” Trump said in that 1991 hearing. “And I truly feel that this country right now is in a depression,” he testified. At the time, the economic boom of the 1990s was just beginning.
“The real estate business, we are in an absolute depression,” he said, blaming it in large part on the 1986 tax reforms.
“I bought things that were great deals in the middle 1980s and even the later 1980s but when the tax law kicked in,” Trump said, “all of a sudden those deals which were good economic deals were no longer good economic deals because they changed the game on me.”
Trump said it was “foolish people” who changed the rules because “they heard the word tax shelter and they thought that tax shelter was a bad thing as opposed to an investment in real estate.”
The New York Times reported that according to the tax information they obtained, Trump reported hundreds of millions of dollars in losses for 1990 and 1991.
Charles Harder, an attorney for Trump, on Tuesday called the New York Times report “highly inaccurate” and based off “inherently unreliable” tax transcripts that may or may not exist.
“Drawing any conclusions from a purported tax transcript would be speculative at best, and constitute irresponsible and unethical reporting,” Harder added.
Tax experts told ABC News that far from hurting Trump, the tax code, back then as well as today, bestows huge advantages on real estate developers.
“Trump clearly is a good example of what real estate developers can get away with,” said Wamhoff.
For example, real estate developers can get a tax deduction on the depreciation, or loss of value, of their properties in excess of the actual wear and tear of the buildings, explained Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center. “Other investors have to play by different rules that limit deductions to the amount of skin they have in the game; in other words, they can only deduct the amounts they really invested,” said Rosenthal.
Real estate investors are also able to put off reporting income for tax purposes, explained Wamoff, by using the proceeds from the sale of one property to buy another property.
“They can get out of reporting the profits, and also more easily get deductions on their losses,” Wamoff said.
The Tax Cuts and Jobs Act of 2017, signed by Trump, did not touch these tax advantages. “Very little has changed since the 90s when Trump took all these loopholes,” said Rosenthal, who explained that real estate developers even got a few benefits from Trump’s tax bill, such as a lowered tax rate on rental income.
“Trump lobbied in 1991 to widen the tax loopholes that he exploited, and since being president he has not done anything to close them,” Rosenthal said.