Congress trying to reduce taxes for the 1% by raising taxes on middle class, says EconMatters

[Editor's note: 1031Gateway supports the efforts of groups like www.SaveThe1031.org, which is exposing the devastation this tax reform proposal would unleash on our economy and mobilizing Americans to make their opposition known to Congress in order to stop this bill. Please visit www.SaveThe1031.org and fill out their form to directly send individual letters to your representative and senators in Congress, urging them to fight for the 1031 exchange.]

"President-elect Donald Trump has plans to reform the tax code, although he isn't able to sign any tax reform bills until after he takes the oath of office in January 2017. Congress is already working on some tax reforms and one of the bills that could have an adverse effect on the U.S. real estate market is the plan to kill the 1031 Exchange and business interest deductions.

The business interest deduction and the 1031 Exchange have been important parts of the tax code since 1913 and 1921 respectively. Both aspects of the tax code protect taxpayers from paying taxes on income and gains that are never received or earned. However, the House Ways and Means Committee is currently drafting major tax reform legislation that they intend to pass through the budget reconciliation process.

The problem however is that the budget reconciliation process requires that major tax reductions be offset by the elimination of other tax provisions, or the introduction of major tax increases, to make sure that any new bill maintains an equilibrium in the tax code. In essence, the House Ways and Means Committee is trying to kill a tax provision that protects million of people in the middle class, and the largest percentage of real estate owners, in order to reduce the taxes that the wealthiest 0.01% of the population pays.

Reasons why killing the 1031 could hurt real estate investors

The plan to eliminate business interest deductions will hurt the real estate market by causing cause real estate investors to pay taxes on the interest payments they make on their real estate assets, reducing their after-tax income. Furthermore, the elimination of tax-deferred exchanges, such as the 1031, would economically prohibit the sale of millions of properties nationwide, driving real estate values back down into recession levels, or lower."

http://www.econmatters.com/2016/12/real-estate-investors-head-into-2017.html

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