So this tax act was just an absolute catastrophe for the country, for the real estate industry, and I really hope that something can be done — as Congressman Thomas recently said, that something can be done to change at least parts of it, because it has taken all incentive away from investing in real estate, and real estate really means so many jobs…by having cut the high income tax rates to 25 percent, as an example, people don’t have the incentive any more to invest. They’re saying, “Why should I take a chance on investing in low or moderate-income housing? I might as well just pay the tax.” But the fact is, that 25 percent for high-income people — for high-income people — it should be raised substantially with the understanding that if you invest, you can get it down and down substantially below that number…I was asked to come by the Chairman, and I make this plea that, if something isn’t done to put the incentive back — I mean, we’re no different right now than the Soviet Union. They have no incentive, and we have no incentive. And if something isn’t done to quickly put the incentive back, this country is going to be in very deep problems.

REP. GUARINI

Real estate has always been one of America’s favorite industries. The tax code has long favored real estate to a great extent because it employs so many people and is so important for the welfare of our economy.

In 1981 we became very generous with real estate. We cut depreciation schedules in half, we gave tax credits. Would you say that’s where we started to go wrong? Is that where we were overbuilding shopping centers and commercial buildings that were not filled?

Donald J. Trump

I think that’s where you started to go right, but maybe there was a excess. I think if it was channeled more toward the housing, which has always been — I mean, there has never been enough housing. You need it desperately and I’m talking all forms of housing. You need it desperately.

You really, you really can do things other than just economy. I mean, I like to say that you can spur the economy through taxes so that the economy actually gets good.

REP. ROGERS (Hal Rogers still serves in Congress in Kentucky’s 5th District)

Now, we’re operating under the budget act, the budget agreement, Senate, which has a pay-as-you-go provision. If you reduce taxes, you’ve got to make up the revenue somewhere else so that we have a revenue neutral action.

Are you saying that if we reinstate the passive loss provision — we’re going to have some lost revenues because of that — am I hearing you say that you would increase the income tax rates of the higher income people? To make up the difference?

Donald J. Trump

I would do that because I believe strongly that people don’t have enough incentive to invest right now at 25 percent. I just don’t believe they have enough incentive to take the risk of investment with recapture and all of the other problems of investing in real estate and other things.

I would absolutely do that with the understanding that if they do make the investments, they can go down to the minimum level. I feel very strongly about that. As far as the $5 billion that we’re talking about, that $5 billion in loss of taxes may contribute $100 billion because of the incentives that it gives.

See, I don’t look at that as a loss in taxes. I think that so much work could be created by getting rid of that horror show that you may take in $100 million. Now an accountant will tell you, “We’re going to lose $5 billion.” But in actuality it could spur hundreds of billions of dollars worth of work.

REP. HUCKABY

Thank you, Mr. Chairman. Mr. Trump, you mentioned the Soviet Union and no incentives there. For the last 45 years we’ve been engaged in cold war with the Russians. Clearly, I think, a year ago it became apparent that we’ve won that war. We spent tremendous dollars in the 1980s, as did the Russians, in the military build-up. It broke their system, in my opinion, left us with a big debt. But clearly we’re the surviving superpower today.

REP. HUCKABY

Here we find ourselves taking a micro look at this economy. Inflation’s very low, running around three percent, interest rates lower than they’ve been in 19 years. No shortage of food, no shortage of oil, the things that have put us in recession in our lifetime.

How high do you think you would have to take the top tax brackets in order to make this happen?

Donald J. Trump

Well, I mean, the higher it is, the more incentive there would be. I guess it was 50 and it was 60 at one point and it was obviously even higher than that, but the higher it is, the more incentive. And I don’t mean middle income and I don’t mean low income. If anything that could stay the same or be lowered.

I’m talking about the people that are making a great deal of money should have an incentive to invest. And I know it was 50 and I’m talking about a substantial increase with the ability to get it down to the minimum number. Create a lot of jobs.

Donald J. Trump

It’s a shame, Congressman, that this very powerful and important industry doesn’t have a better lobby, because I watch things being lobbied that should never be passed and they get passed, and I look at things like this, and as you say, it’s on a back burner and you know how important it is. And the real estate industry is a group of thousands of people, some wealthy, some not wealthy, most not very wealthy right now. And I will tell you, they have absolutely the most pathetic lobby in the history of the United States Congress. It is so bad — and I don’t know how many of these people behind me are lobbyists, but they’re not doing a very good job, I can tell you that.

Mitchell: “The gold standard for good tax policy is the flat tax. Tax income at a low rate, with no double taxation, and no distorting loopholes. Trump presumably was talking about the 1986 Tax Reform Act, which was partly good (lower tax rates) and partly bad (more double taxation). And real estate wound up losing some tax preferences.

“To give a bit more detail, real estate/housing historically has received favorable treatment in the tax code. But this doesn’t mean the tax provisions are necessarily wrong. In some cases, the provisions are right, but they should apply to all forms of investment, not just real estate/housing. To understand more, see here.

“The bottom line is that we don’t need high tax rates to encourage investment. We simply need to get rid of the existing bias against saving and investment. But without also have special status for one sector such as real estate.”