Taxes

Goodie for Trump Oozes Out of Tax-Reform Fog

Latest bill includes a break for real-estate investors with few employees. Can you name one of those?

Little cat feet.

Photographer: Chris J Ratcliffe/Getty Images

Legislative shenanigans come on little cat feet.

And so it went on Friday, when Republicans sitting on silent haunches appear to have added a last-minute provision to their monumental tax overhaul. The addition would allow real estate investors — guys like President Donald Trump — to see their business income taxed at a lower, more favorable rate than they would otherwise have had to pay.

That wasn't an entirely new development. Congress had spent more than a month debating giving owners and developers of commercial real estate with significant employee payrolls some sort of a tax break, as Bloomberg News reported early last week. But as three reporters from the International Business Times first told us over the weekend, Congress dropped safeguards Friday that would have prevented investors with lots of assets but relatively few employees — yes, guys like Trump — from taking advantage of the more favorable rates.

How did that happen? You can imagine Trump turning away from his TV screen for a minute or two to ask whatever aide was tasked with briefing him on the final dimensions of the bill, "What’s in this for me?"

But it's unlikely that the president needed to be ham-handed. His fellow travelers in Congress understand that the surest way to get his support is to appeal to his self-interest. Maybe, amid the tumult over resolving differences between House and Senate versions of the tax bill, they thought no one would notice. Until the IBT reporters did.

Senator Bob Corker, a wealthy Tennessee Republican and real estate investor who will benefit from the change, told IBT that he didn't go from being against the tax bill to being for it because of the switch. In fact, he acknowledged, he changed his mind without giving his party's final tax bill much scrutiny at all.

“I had like a two-page summary I went through with leadership,” Corker said. “I never saw the actual text.”

Corker, who isn't seeking re-election next year, asked Senator Orrin Hatch, the veteran Utah legislator who is helping to steer the tax bill along, to explain how the break for real estate investors came to pass.

Hatch replied in a letter to Corker on Monday:

It takes a great deal of imagination — and likely no small amount of partisanship — to argue that a provision that has been public for over a month, debated on the floor of the House of Representatives, included in a House-passed bill, and identified by [the Joint Committee on Taxation] as an issue requiring a compromise between conferees is somehow a covert and last-minute addition to the conference report.

For the sake of argument, let's give Hatch the benefit of the doubt and concede that there was nothing last-minute about tax code changes benefiting real estate investors. Even if Hatch wins that point, the provision's existence is still numbing. After all, it's a sop to the rich in a deeply flawed bill that already is stocked with benefits for companies and wealthy individuals.

The real estate break also undermines the notion, which the president himself has avidly promoted, that the tax bill aims to help working Americans.

"This is going to be one of the great gifts to the middle-income people of this country that they've ever gotten for Christmas," Trump told reporters on Friday at the White House when asked about the bill. This echoed some things he had said in September, when he declared that the Republican plan was "not good for me, believe me" because the legislation had "very little benefit for people of wealth."

Trump also trotted out his daughter Ivanka on TV on Monday to pitch the same snake oil, and she chatted on Fox & Friends about "historic tax reform" that is aimed at "middle income tax relief."

No, it's not. It's a tax plan loaded with treats for the affluent and is one that that will damage the finances of local, state, and federal governments (which is probably one of the chief goals of the legislation anyway). It's a bill that actually gives corporations the tax windfall that the Trumps claim the middle class is getting.

The Trumps know this, of course. As I've noted before, part of Trump's primary electoral base mirrors his traditional business base: working- and middle-class consumers. He's always been adept at selling those constituencies a bill of goods. When the tax bill first started taking shape in October, I asked this question:

"The details of the tax plan Trump tries to push through Congress will demonstrate whether he truly supports average Americans — or, like a classic grifter, if he’s willing, instead, to profess his love for his marks right up until the moment that he fleeces them."

Now we know the answer.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Timothy L. O'Brien at tobrien46@bloomberg.net

    To contact the editor responsible for this story:
    Jonathan Landman at jlandman4@bloomberg.net

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