Seidman, Trump Urge Tax Breaks For Realty
WASHINGTON -- Donald Trump and L. William Seidman urged Congress on Thursday to boost the economy by restoring some real estate tax breaks.
"If something isn't done to put some incentives back, we could be in a deep recession-slash-depression for years," said Mr. Trump, whose real estate empire tottered during the recession.
He and Mr. Seidman, who recently retired as chairman of the Federal Deposit Insurance Corp., made back-to-back appearances before the House Budget Committee's task force on urgent fiscal issues.
Tax Reform Blamed
Mr. Seidman said commercial real estate is in a depression. He blamed the 1986 Tax Reform Act, which tried to correct abuses but, he said, went overboard. "Retroactive changes in tax laws almost ensured that we'd have these real estate problems," he told the panel.
Mr. Trump said Congress had taken away all reason for developing and investing in real estate. "We're no different now than the Soviet Union," the real estate financier said. "They have no incentives, and we have no incentives."
Both witnesses endorsed storing passive-loss rules for real estate investment. And both said reducing the capital gains tax rate relative to marginal rates on income would boost real estate values by spurring investment.
But that's where the similarities ended.
Mr. Trump was emphatic that tax changes alone could restore the flagging real estate market's health. Indeed, he said, Congress could do some good by raising taxes on the rich, provided it left the capital gains rate alone or pushed it down a little.
"It would be a big help for the upper-income taxpayer to have an incentive to invest rather than paying taxes," Mr. Trump said. He said the top income tax bracket, now at 31%, could be pushed up to 50% or 60%.
But Mr. Seidman ridiculed that prescription for economic recovery.
"It's the reverse Laffer curve," Mr. Seidman told reporters afterward, referring to economist Arthur Laffer's theory that reducing taxes stimulates economic growth.
In his testimony, Mr. Seidman said the problems are too big for simple answers. "Encouraging real estate investment without addressing the fundamental problems causing the sluggishness in our economic recovery will not solve the problem," he said.
To Wean the Nation from Debt
He noted that consumers are weaning themselves from debt, and he urged the government to imitate them. But he said it will take time. "When you've been on a bender," he said, "no amount of tabasco sauce and tomato juice will make it go away soon."
Mr. Seidman also said bank examiners have gotten too much blame for economic woes. "There are only eight to nine thousand of them," he said. "If they're the problem, we could put them all on vacation for a year and cure the recession."