A centerpiece of Donald Trump’s tax plan is doing away with a range of popular exemptions and deductions in favor of lowering the top tax rate for the wealthiest Americans.
Yet when President Ronald Reagan did exactly that 30 years ago, Trump thought it was an awful idea.
Trump told Congress in 1991 that Reagan’s 1986 deal lowering rates for ordinary Americans and cutting the top rate for the wealthy from 50 percent to 25 percent was a mistake and should be reversed.
“That 25 percent for high income people, it should be raised substantially,” Trump testified on Nov. 21, 1991, before the House Task Force on Urgent Fiscal Issues.
At the time, Trump complained that the 1986 tax overhaul cutting the top tax rate took away the incentive for wealthy Americans to pool their investments into tax-sheltering projects like his, a process called real estate syndication.
“This tax act was just an absolute catastrophe for the country,” Trump said.
In addition to pushing Congress to raise the tax rates, he told lawmakers to restore the tax breaks for investments in projects like his – a package Congress said would cost $5 billion in lost revenue.
“See, I don’t look at that as a loss of taxes. I think that so much work could be created by getting rid of that horror show that you may take in $100 billion,” Trump said. “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.”
The dentists, the doctors, they have to have the incentive to invest. Donald J. Trump arguing before Congress in 1991 for higher tax rates and restoration of a tax break that helped him attract investors
Complaining at length about how Reagan’s tax changes had hurt the real estate sector, Trump told lawmakers the country was suffering through a depression, not a recession.
“That’s not much of a tribute to this group of folks that are running the country,” he said. “People are kidding themselves if they think it’s a recession.”
In fact the recession of July 1990 to March 1991 was mild by historical standards. It lasted eight months and came after almost eight years of economic expansion.
Trump back then also envisioned a government role in stimulating the economy to end a recession.
“The economy is not going to spur itself,” he implored lawmakers.
Trump also seemed to have been caught unaware by the 1986 tax change that was hammering his business and the entire sector.
“I did hear things about it in 1986 . . . but nobody ever thought it would be possible to get something like this passed,” Trump told the task force chairman, Rep. Frank Guarini, D-N.J.
And if Trump had heard things in 1986, he did not share any concerns with Congress at the time.
“I used to do a lot of fundraising in New York, and I met a lot of Realtors. And I don’t ever recall any fundraiser mentioning him. He certainly wasn’t a player in town,” recalled Robert Packwood, who in 1986 was an Oregon Republican who headed the Senate Finance Committee, which had jurisdiction over tax matters.
The 1986 tax-code revamp imposed limits on what had been unbridled deductions. Losses on so-called passive investments such as real estate and business partnerships were now capped as a write-off from taxes at $25,000 per calendar year.
“The (commercial) real estate industry was pretty much represented by one or two big lobbyists in Washington, and they got crushed,” remembers Bill Diefenderfer, chief counsel back then to the Senate Finance Committee.
Trump definitely concurred, attacking the real estate sector’s lack of influence.
“I will tell you they have absolutely the most pathetic lobby in the history of the United States Congress,” Trump told the panel.“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.”
That day, Trump did make an important ally. A Republican congressman from California paid close attention to the New York developer’s concerns and complimented him.
“I’ve never really heard you in terms of your professional expertise, I’ve only read about you in terms of other activities,” Rep. Bill Thomas said to chuckles in the room, since Trump was in the midst of a nasty divorce from his first wife, Ivana, after taking up with beauty queen Marla Maples. “And I have to say that I admire you in terms of your professional expertise.”
Thomas would later go on to be a GOP senior leader and the chairman of the tax-writing House Ways and Means Committee when President George W. Bush signed the controversial 2001 and 2003 tax cuts.
With a lift from Thomas and both Republicans and Democrats, the Revenue Reconciliation Act of 1993 passed a few years after the hearing, restoring the ability of the real estate sector to take huge write-offs of losses.
Two years later after that – and largely unknown until last month, when parts of his 1995 tax returns were leaked to The New York Times – Trump took the massive $916 million loss that has become a flashpoint for debate in this election about tax fairness.