The Art of the Comeback, by Donald Trump: on Tax Reform


1986 tax laws destroyed incentives retroactively

It was 1986, the peak of the real estate market's boom. Some pundits down in Washington D.C., decided it was time to rein in a few overzealous developers, who, the pols claimed, were unfairly taking advantage of tax breaks and favorable depreciation schedules. The 1981 tax code was revised and the Tax Equity and Fiscal Responsibility Act of 1986 (TEFRA) was passed, destroying just about any incentive anyone might have for investing in real estate. And, you may remember, it included a stipulation that the tax laws be applied retroactively. Overnight developers and investors went bust by the thousands. The banks did just as badly. Here's why. First, TEFRA eviscerated the tax shelters--in place to encourage investment--thereby leaving investors virtually no incentive to put their money into any type of development--including low-and moderate-income housing.
Source: The Art of the Comeback, by Donald Trump, p. 9-10 Oct 27, 1997

High tax rate encourages investment risk

[In the tax law change of 1986], the upper-income tax rate was lowered from 51% to 32 %. Investing involves risk. With a 51 percent tax, investors might take a chance on a new housing project. If the project went south, the investor could recapture his losses in the form of a tax break. If an investor is taxed only 32 percent, why bother with the risk?
Source: The Art of the Comeback, by Donald Trump, p. 10 Oct 27, 1997

  • The above quotations are from Trump:
    The Art of the Comeback
    by Donald J. Trump and Kate Bohner.
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Page last updated: Mar 19, 2019