As Trump Built His Real Estate Empire, Tax Breaks Played A Pivotal Role
ARI SHAPIRO, HOST:
Despite the political drama surrounding President Trump, House Speaker Paul Ryan said today he's confident Republicans can still achieve one of their major policy goals this year - a tax overhaul. The White House is pushing for a series of personal and corporate tax cuts. One industry that benefits from the current tax code is real estate. President Trump himself has long taken advantage of local, state and federal tax breaks. Any changes in the tax code could affect his bottom line, as NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: When a young Donald Trump came to Manhattan from Queens in the 1970s, this was the project that made him famous - The Grand Hyatt, a gleaming glass tower on East 42nd Street.
TIMOTHY O'BRIEN: This was his first sort of flag in the ground as a New York developer.
ZARROLI: Trump biographer Timothy O'Brien says the deal would never have gone through if city officials hadn't agreed to an unprecedented 40-year tax abatement.
O'BRIEN: It was crucial to the finances of the deal-making sense at the time it was struck. It was crucial to the banks who loaned him money to get it done.
ZARROLI: Over the years, Trump would seek lavish tax breaks for every property he built, including Trump Tower.
O'BRIEN: Once he got the tax abatement on the Grand Hyatt, that became like red meat to Donald. I think it was always part and parcel of his negotiating stance.
ZARROLI: Although Trump has never released his tax returns, The New York Times estimated last year that Trump had received some $885 million in tax abatements over a 40-year career. Nicole Gelinas is with the Manhattan Institute.
NICOLE GELINAS: Long before Trump ran for president, he was known in New York City as a developer who was consummate at finding and obtaining these tax breaks, even when these tax breaks weren't specifically designed for his types of projects.
ZARROLI: And he would do the same thing in Nevada, Florida and almost anywhere he did business. Trump would persuade local officials to cut his property taxes, and he would regularly appeal the assessments of properties he owned. Trump also benefited greatly from federal tax breaks. Steve Rosenthal of the Tax Policy Center says in some significant ways, the U.S. tax code helps real estate developers. For instance, they have much more leeway to deduct expenses.
STEVE ROSENTHAL: A normal taxpayer outside of this area would be limited on, say, interest expense deductions, operating expense deductions. But there are special forms of relief for real estate investors.
ZARROLI: Over the years, there have been scattered attempts to eliminate some of these breaks, but they have never gone far, says Nicole Gelinas.
GELINAS: People talk about it but never very seriously. Even in the very vague tax proposal that Trump put out, they would leave real estate alone.
ZARROLI: But some members of Congress say it may be necessary to reconsider a few of these tax breaks. One idea under consideration is to reduce deductions for interest payments. In a business like real estate that relies heavily on debt financing, that could be a big blow. The Trump administration has resisted such ideas in the past, and the Tax Policy Center's Steve Rosenthal says there's likely to be big pushback against such a change.
ROSENTHAL: Real estate is a very powerful political force. There are real estate interests in every congressional district in the country.
ZARROLI: Rosenthal says other moves being contemplated by Congress would actually benefit Trump. For instance, most of Trump's businesses are what are called pass-through entities. The money they make is counted as income. So a big cut in personal income tax rates would reduce Trump's tax bill. Whether Republicans can succeed in pushing through their tax overhaul this year is unclear. But for Trump, a lot is at stake if they do. Jim Zarroli, NPR News, New York.
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