GOP tax cut includes $67 billion in carve-outs for real estate developers

It also makes it harder for private homeowners to tap into their main source of wealth.

A family walks past a newly-constructed home for sale in Chicago, Illinois. CREDIT: Scott Olson/Getty Images
A family walks past a newly-constructed home for sale in Chicago, Illinois. CREDIT: Scott Olson/Getty Images

Professional real estate developers will get a roughly $67 billion giveaway from taxpayers over the next decade even as individual homeowners get hit with higher taxes, according to a new analysis of the tax cuts Trump signed into law last December.

The estimated tax break for wealthy builders and landowners comes from a combination of smaller sources. The new tax law makes it easier for development firms to pay untaxed dividends, lets them deduct the cost of the loans they rely on to turn old tenements to new luxury blocks, and renders the land swaps underlying many of their deals effectively tax exempt.

Most developers are also well positioned to take advantage of Trump’s biggest, clearest giveaway – the deduction of so-called “pass-through” income from federal taxes. Anyone in any industry who can afford a fancy and unscrupulous accountant to restructure their official employment activity as though they were a one-person small business will be able to shave a fifth of their takings out of the IRS’s jurisdiction under that provision. The same idea taken to a slightly more aggressive extreme helped bankrupt Kansas under former Gov. Sam Brownback (R).

While developers are in good company on the pass-through windfall, the other breaks they stand to reap are bespoke.

The law caps interest payment deductions for other large businesses, but carved out real estate developers from the new cap. The Joint Committee on Taxation estimates that small sliver of wealthy property-swingers will take home $16 billion over the next ten years from that carve-out.


Conservatives argued that a crackdown on corporate debt subsidies from taxpayers meant that the bill wasn’t a gift to the wealthiest Americans. But they let real estate moguls hide from that supposed toughness. In similar fashion, the bill ended a long-criticized policy of letting corporations pawn the cost of non-cash transactions off onto taxpayers. But developers are exempt here, too – when they swap one piece of property for another for tax reasons, they’ll still get the public’s money. JCT estimates that taxpayers will give them $21.7 billion over the next decade thanks to that second carve-out.

The rest of the total comes from the same pass-through favors and dividend advantaging that almost every truly rich American gets to count on for the next ten years thanks to Speaker Paul Ryan’s (R-WI) embrace of Trumpism.

It’s less than coincidental that housing companies are getting special favors under the new law. Trump does for his own, and that means the developer moguls who would rather build shiny new empty housing no one can afford than do the scutwork of rebuilding America’s evaporating capacity to house the working class.

But if the developer handouts were combined with some sort of rhyming hand up for families who own their homes, the bitter pill might go down smooth. They aren’t, really.


Home equity loans used to be tax deductible no matter the reason a family had taken them out. Now, the loans are only deductible if they’re reinvested in the property against which a homeowner borrows. Since homes are the primary wealth source for most working families, they also serve as an emergency piggybank. The tax code used to acknowledge that – if you needed to borrow against your house to cover your daughter’s cancer treatments or settle up after a freak accident, you could knock the borrowing costs of the loan off of your taxable income. No longer. People forced to draw money out of their houses to cover emergency medical bills or help finance a college education will get hit coming and going, taxed on the second loan even after knocking the effective value of their home – and their family’s upward economic mobility – back by tens or hundreds of thousands of dollars.

While small in the context of a tax cut measured in trillions of dollars, the developer handouts underscore the warped nature of the GOP package. If the government wanted to stimulate economic activity, the same price tag could have erased a staggeringly large amount of consumer loan debts for the have-not class whose spending drives growth.

The details of how Trump revised home loan interest tax rules also betray a clever capacity for picking up on once-bipartisan causes and twisting them into handouts for the rich. Homeowner tax deductions have long been one of the primary drivers of economic inequality, as incentives meant to boost housing markets accelerate the class divide between lower-income renters and higher-earning owners. Progressive economists have called for shrinking, revising, or wiping out a variety of housing tax benefits for at least a decade, in order to reinvest those public dollars in programs that would liberate working-class families. Colleagues on the other end of the ideological spectrum have often joined them.

Mortgage interest deductions were therefore long understood to be a primary hinge in any potential bipartisan deal on the tax code. But instead of approaching that sturdy-if-partial consensus as a place to balance the windfalls of a tax cut between rich and poor, Trump and the Republicans who hold their noses and serve him decided to put homeowners in a straitjacket and give developers an even better deal than they already get.