Republican presidential nominee and real estate mogul Donald Trump’s proposed new tax plan could potentially boost American real estate, reports the Wall Street Journal.
Trump floated changes to his tax plan in a speech in Detroit August 8, but his campaign said the proposed changes will not be released for a few weeks.
His plan would reportedly allow for two things that policy makers from both sides of the aisle say should never be coupled: “letting businesses deduct interest, and allowing expensing, or immediate write-offs, for investments in equipment and buildings,” according to a Thursday Wall Street Journal report.
Democrats are skeptical of this “immediate expensing” because of “the potential revenue loss—and are dubious that speeding up deductions for capital investment would have much benefit in an era when low interest rates mean deductions today and deductions in the future have similar value,” according to the Journal.
Experts warn that immediate expensing would benefit large businesses rather than small businesses and start-ups.
The Tax Foundation notes, however, that under current law immediate expensing requires that “businesses must take depreciation allowances (capital consumption allowances) that stretch the recognition of the costs over several years, or even decades.” If fully enacted, the Tax Foundation Taxes and Growth Model predicts that “full expensing for equipment and buildings could add more than five percent to GDP over time, and more than sixteen percent to the capital stock.”
Those are not the only positive benefits, immediate expensing would “boost wages by 4.5 percent, and create nearly a million full-time equivalent jobs,” according to a Tax Foundation report.
The results of coupling these two tax features would provide negative interest rates for projects financed with debt, like real-estate. Under this plan, companies could take this debt and finance it with future profits.
A trump advisor, Steve Mnuchin, said the goal of this new plan is “would be to tie expensing to job creation and new investment,” reports WSJ. The idea of expensing has become incredibly popular in the Republican Party for some time now in hopes it would create new investment and lead to overall growth in the economy.
An anti-Trump protester told the Journal that “the people that would benefit most from this are people that would use a lot of debt and are in real estate.”
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